Christian Pilkington

Splitting the difference: transfer of assets and liabilities in restructurings to reset business profile

A business may need to restructure for a variety of reasons; these may be wider industry issues or issues specific to the business, certain assets or segments therein. Issue may arise, among other reasons, due to underperformance, rising costs or a diversion of management time. Management may look at a business in a way that differs from creditors, with the former particularly interested in future growth and the latter likely looking at shorter term cashflows. In a restructuring context, creditors may make the transaction conditional on a refocus of the business as a part of a wider deal to support the business (or a part thereof) in its future operations. Alternatively, there may be alignment on the non-core nature of certain assets and, as part of a restructuring, an agreement to isolate the value of those assets to repay creditors. This article explores general themes that may be relevant when splitting certain assets and liabilities as part of a restructuring. Crucially, transactions of this nature are bespoke and, whilst they are unlikely to be the prevailing method of restructurings, they may provide optionality or tailored solutions which may benefit all parties.