Corporate Restructuring & Distressed Asset Investing

Overview on Corporate Restructuring & Distressed Asset Investing

• When we talk about India, how we can forget that India is one of the nation, that experienced the bull market for the longest time among the world’s largest leading markets, However, one outcome of the extreme uncertainty and volatility of the market is the opportunity to get assets that were pricey in the past at a discount is once in a lifetime. It is also very rare to get good returns by investing your money in the company during its financial crisis. Yes, we are elaborating on distressed asset investment here.
• Distressed asset investing program which helps you in knowing about the technique and challenges which are beneficial in detecting and evaluating investment opportunities for distressed assets. Distressed assets are increasing rapidly in the market, people get trapped due to a lack of knowledge and skills. You need to identify encouraging opportunities in this assets category by knowing about the company’s value or bankruptcy.
• In case you are a leader at the senior management level, it is possible that your company is going via distress because of an economic crisis. It can also be due to leveraged buyout then this distressed asset investing program is suitable for you then. Enhancing your skills and knowledge of the potential consequences & advantages of the restructuring choices available to the organization.

Highlights of the distressed asset investing programme

Below are key highlights of this interesting programme are as follows:

• Evaluation of financial distress.
• Basics/Foundations of value Principles of investments in the distressed environment.
• Plans for enhancing the Investors, hedge funds & Equity of Pvt Ltd.
• Distress leads to the possibility and growth of reorganizing.

Benefit of Distressed asset investing program

• Figure out the indication of crisis in the financial statement of a company.
• It predicts why and how a company isn’t able to change its conditions & grow further.
• In difficult distressing conditions, it helps to get higher returns and reduces internal expenses.

What is a distressed asset?

• Initially, we should understand the meaning of distressed assets’ Distressed assets are the fixer-uppers of the world of commercial real estate. The assets which doesn’t perform according to their actual potential. There are several reasons behind this performance such as physical condition, mismanagement, markets factors, and many more. It means distressed assets are at apurchase price lower than their average value.
• There are a wide range of reasons why distressed assets category can be quite diverse. The most crucial factor, however, financial distress or economic hardship. It implies that the owner may have difficulty paying their debts.
• Distressed assets are having opportunistic risk profile because the Sponsor that leads an opportunist transaction with financially distressed assets may purchase the property entirely on other hand, we can say that they ‘buy the debt’. All opportunistic projects do not initiate with a distressed asset. Alternatively, all investments in distressed assets by commercial real estate in a distressed are a part of the opportunistic bucket. Effectual asset and business valuation services can make or break a deal.

What are the key Important considerations when investing in distressed assets ?

1. Appreciation

• There was a discount on the original or preliminary purchase price, so there is always a good chance to get a high return on distressed assets investing, but there is the possibility of low or nonexistent cash flow in the initial phases.

2. Discounted purchase price

• The sponsor buys the debt or real property because distressed assets usually trade at a discounted price compared to the market price and the sponsor can execute it and turn around the business.

3. Legal costs

• Purchase the debt for acquiring a property using a foreclosure can be accompanied by substantial legal expenses or the risk of borrower bankruptcy.

4. Business plan

• A good business plan will be able to balance the distressed assets. Unpredicted problems like dissatisfied tenants and slow maintenance reluctance to take ownership of a distressed project can affect the projected time limit and the estimated final cost.

5. Due diligence

Financial due diligence

• Distressed asset investing requires a lot of effort to allure the end-users. Generally, distressed assets sellers try to make deals with purchasers with the ability to close it swiftly.

Legal due diligence

Vendor due diligence

6. Valuation of distressed assets

• Business and asset valuation is also an important criterion for investing in distressed assets.

The buyer should focus on these parameters for distressed asset investing.

• Due to high risk and lack of guidance it is very difficult to turn around the distressed assets, but it is possible if you contact an experienced team and follow its business plan. There are no. problems, and at some point you have to alliance with other organizations whose visions are similar and predict the possible pitfalls. Before working with any sponsor you should go through the track record of the sponsor and their capability to deal with distressed assets and then implement their business plan.
• Check the previous works of the sponsor and the results of those projects as compared to the initial stage. It is essential to contact a sponsor who has shown excellent results in the projects they worked on before. These sponsors are able to deal easily with distressed assets investing due to their regularity. When you follow all these points, the chance of success in dealing with distressed assets increases. First, make sure about their reputation before reaching out to any sponsor for valuation services for the valuation of distressed assets in India.