Out-of-Court Workouts

When we negotiate with banks and other creditors on a client’s behalf, it’s with the company's overarching business goals, concerns, and priorities in mind. The aim of these negotiations – or workouts – is to reduce debt or extend payment terms so the company can service its obligations going forward. Often called an "out-of-court restructuring," a workout is designed to get a company the relief it needs without resorting to the more complex, formal, and expensive Chapter 11 process.

 

Some workouts are relatively simple, involving just one or a few creditors, where the company hires an experienced restructuring lawyer to negotiate with creditors so management can stay focused on running the business. On the other side of the spectrum, complex workouts can involve hundreds of creditors and require a team of professionals.

 

In just about every workout, it is the credible threat of Chapter 11, overt or implied, and the creditor's likely outcome in that scenario, that motivates them to negotiate. Put another way, a successful workout takes place "in the shadow" of Chapter 11. That's the reason we talk about Chapter 11 even though the goal is to avoid it, and that's why it's crucial a company hires a highly skilled Chapter 11 attorney to run its workout.