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A QUICK RESPONSE IS CRITICAL. Experienced advice received early can often assist the distressed company in diffusing the hostile relationship between the company and its creditors. Equity holders and creditors alike can be brought together with the assistance of experienced advisers to facilitate a consensual resolution that is far more likely to maximize recoveries. Acquirors can gain an advantage over other bidders through early and focused action. Critical suppliers and customers can monitor the distressed company's progress and make interim and permanent contractual adjustments to secure and protect their ongoing business relationships with the distressed company. CHALLENGES: • Severe liquidity challenges • Stretched accounts payables • Turbulent industry conditions • Declining/negative cash fl ow • Covenant and/or payment defaults • Loss of key members of management • Management credibility being questioned • Senior lenders restricting access to capital • Swamping debt: total debt exceeding enterprise value • Balance sheet not supporting quest for additional capital • Government priority payables being poached for cash fl ow • Competing claims or interests of varying stakeholders in confl ict • Actual or threatened adversarial bankruptcy or insolvency proceedings being taken by other stakeholders SOLUTIONS: • The preparation of a carefully crafted plan to address the concerns of key stakeholders including important secured and unsecured creditor constituencies, key suppliers, customers and employees. The plan needs to address the interim liquidity crisis. • External management may be sought for troubled situation expertise and to enhance existing management credibility. • The execution of a sale initiative for the entire business or for certain subsidiaries and/or operating divisions with failing performance or for "non-core" assets in order to stem the fi nancial bleeding, provide immediate cash, and focus management and operational resources on the remaining business. • Reorganization of the corporate capital structure and accessing alternative debt and equity fi nancing including debtor-in-possession fi nancing, asset-based fi nancing or private equity infusions in order to recapitalize the distressed business, fund growth and/or refi nance existing debt which is either at maturity or in default. • Sales processes to discourage "bottom feeding" or opportunistic buyers and to maximize the going concern value. Buyers may have to be sourced globally and managed carefully. The Gowlings M&A team benefi ts from a harmonized combination of traditional M&A skills... and an intimate knowledge of dis- tressed sales and realization processes. GOWLINGS CAN HELP: 1. Advise the distressed company on: (a) creditor, supplier and customer negotiations including developing and negotiating appropriate forbearance, credit amendment and sale structures and strategies; (b) sourcing, negotiating and documenting interim and permanent fi nancing solutions; (c) retaining investment bankers and advisers to assist in the distressed M&A process; and (d) distressed M&A advice including: • assisting in developing and implementing sales processes, negotiating LOIs and defi nitive agreements of purchase and sale; • facilitating due diligence; • managing the stakeholders; and • seeking consensual and, where necessary, court- ordered processes to maintain stakeholder actions in alignment with the distressed sales process and maintain the going-concern value of the business. INHOUSE JUNE 2009 • 29