Careers in Restructuring. Insight into the role itself and the current restructuring market.
Dan Gibney from Moelis speaks to Hiring Circle about careers in Restructuring
The Hiring Circle team recently spoke to Dan Gibney, an experienced Restructuring and Corporate Finance Adviser with over 19 years’ experience at Moelis, Close Brothers and KPMG. In this interview he shares his wealth of knowledge about the restructuring market; how it has been impacted by Covid-19 and his views on the future, as well as advice for anyone considering a career in restructuring and the keys to success in the industry
What exactly is restructuring and what does the role involve?
Restructuring can be split into two categories. Financial Restructuring and Operational Restructuring.
Financial Restructuring involves situations where there is a level of debt held by a company or country that is either unsustainable or at risk of being unable to be serviced, repaid or refinanced in accordance with its terms. As a result separate financial and legal advisers are employed by relevant stakeholders to the situation, such as the company and lenders, to negotiate and implement a solution to avoid insolvency.
There can be many different solutions, ranging from financial covenant amendments, deferral of interest and repayment dates (“amend to extend transactions”) where more time is required for a refinancing, to in the case of more fundamental over-leverage, equity injections, divestments and more wholesale redesigns of the company’s capital, corporate and ownership structures such as debt for equity swaps in which lenders take some degree of ownership of the business in return for renegotiation or reduction of debt. Each solution is unique to the business requirements and is generally the result of complex negotiations between often multi-party stakeholders.
"A deep understanding of business plans, cash flow and liquidity, valuation techniques, negotiation strategies, debt documents and restructuring implementation mechanisms is required, amongst other skills."
Lead financial advisers in restructuring transactions typically take the lead role, assessing the situation, determining options and the optimal solution for their clients and then leading negotiations to achieve these objectives. They will also play a lead role in managing the process towards completion and co-ordinating other advisers.
A deep understanding of business plans, cash flow and liquidity, valuation techniques, negotiation strategies, debt documents and restructuring implementation mechanisms is required, amongst other skills. There is a meaningful degree of overlap with M&A competencies and as a result restructuring teams often sit within the Corporate Finance arm of investment banks.
Legal advisers will assist in a detailed assessment of the capital and corporate structure; assessing rights and remedies through the debt documentation and helping design the legal implementation structure. They will work closely with the FA in order to maximise strategic leverage in negotiations and will then lead the documentation and legal implementation of the transaction.
Operational Restructuring is more focused on business improvement and in optimising corporate operations, processes and structures and is generally a separate discipline.
What are the main considerations for someone thinking about a career in financial restructuring?
I would recommend learning as much as possible about restructuring and what it entails. Try to speak to people in the industry and review and understand historic transactions. It’s a demanding job, but very interesting and rewarding, so you have to ensure that you’re going to be sufficiently enthused and motivated to see it through. Think about why you would want to go into restructuring, as compared to other Corporate Finance roles such as M&A.
"It’s a demanding job, but very interesting and rewarding, so you have to ensure that you’re going to be sufficiently enthused and motivated to see it through."
Such preparation would also stand you in good stead for interviews.
What traits make a good restructuring advisor?
As well as strong financial analytical capabilities there’s a strong strategic element, as you seek to use financial and legal information to maximise your client’s negotiating position. You need to be able to review, comment on and understand debt and other legal documentation, have strong attention to detail but also be able to communicate complex situations in clear and concise ways for senior-level clients. Project management and driving deals forward to deadlines is also a necessary skill, particularly because timing may be critical when the business may not have much time in order to avert insolvency.
What was the impact of COVID-19 on the restructuring market?
We saw a very sharp increase in restructuring activity from March and April 2020 as businesses directly impacted by the pandemic found themselves with limited liquidity and debt structures that were no longer likely to be sustainable, and these situations needed to be worked through as soon as possible.
In the early months, new funding was hard to come by and no-one in the market knew how long the disruption was likely to last. By the summer of 2020 as the situation became a bit clearer and lenders regained some confidence, the market stabilized at a relatively high level of activity and quietened towards the end of the year.
What is your future view of the market?
Activity is expected to remain relatively muted in the short term as debt instruments have often been issued on borrower-friendly terms which means there are limited trigger points such as financial covenants to precipitate a restructuring. Strong debt markets persist, fuelled by a high degree of global liquidity, which results in businesses being able to refinance ahead of maturity at higher leverage levels then would have been the case in weaker markets.
"Activity is expected to remain relatively muted in the short term... Longer term, the corporate debt burden continues to grow..."
Longer term, the corporate debt burden continues to grow, which will present restructuring opportunities either in weaker sectors or in response to any worsening of debt markets in the future, such as a result of tightening government monetary policies.
Have you got any personal career advice for new recruits?
For a piece of advice to a new recruit, I would recommend that new team members on a restructuring transaction seek to understand all elements of the transaction, leaving them better placed to proactively take on more responsibility and increase their value to the team. Don’t be afraid to ask questions in pursuit of this and you’ll find that senior team members are happy that you asked.
There can be a lot of hard work and time-pressure when you start a career in this sector, which can make it difficult to step back and understand the bigger picture of the deal, however this understanding is very important to progression and will also make your experience significantly more interesting and rewarding!