(a) If a corporate debtor is in financial difficulty, is there an attitude of 'concealment' or 'denial' toward the admission or exposure of that financial difficulty?

 

Normally a corporate debtor in financial difficulty will attempt to conceal or deny the debt.

(b) If so, is the reason for this based on cultural or other factors?

 

Cultural factors to the extent that a social stigma is attached to such difficulty. The desire to put off the attending and consequential problems that occur once the issue of financial difficulty gets publicly known also play a part. Also in a large number of cases there is mala fide in that the projects for which loans are taken are unviable right from their inception and therefore there is a continued effort to cover up.

(c) Is it likely that a corporate debtor would:

(i) volunteer the fact of its financial difficulty to a lender or group of lenders; or

 

Not likely.

(ii) admit or concede it only if and when confronted by a lender or group of lenders?

 

Yes, often after avoiding the confrontation.

(d) If a corporate debtor is in financial difficulty, is it likely that the corporate debtor would:

(i) do nothing;

 

Do nothing for as long as the admission can be possibly deferred.

(ii) seek expert assistance and advice; or

 

Probably try to exert influence.

(iii) accept the appointment by a lender of an outside expert/advisor?

 

Only if forced to do so.

(e) If it was agreed between a lender and a corporate debtor that an expert/advisor would be appointed, is it likely that a corporate debtor would give the expert/advisor unrestricted access to all relevant financial and other information regarding the corporate debtor?

 

Not likely.

(f) In that situation, is it likely that the financial and other information regarding the corporate borrower would be:

(i) complete; and

 

Probably not.

(ii) accurate (particularly regarding the valuation of assets and the assessment of liabilities)?

 

Probably not.

(a) Is it more common that the financial difficulty of a corporate borrower will be:

(i) volunteered by a corporate debtor; or

 

Voluntary admission or information is not likely.

(ii) discovered by a lender (and, if so, how)?

 

A lender usually discovers the existence of a corporate borrower's financial difficulty when the borrower defaults on repayment either to the lender itself or to other lenders.

(b) If a lender becomes aware that a corporate debtor is in financial difficulty, is it likely that the lender would seek to investigate the financial crisis of the corporate debtor itself and employ an expert/advisor to investigate the financial position?

 

Yes.

(c) If so, is the expert/advisor likely to be:

(i) an independent professional; or

(ii) an 'in-house' employee of the lender?

The expert/advisor is usually an in-house employee of the lender.

(d) Is it likely that information regarding the financial position of a corporate borrower as discovered from the work of an expert/advisor would be:

(i) kept secret from other lender/s or creditors;

(ii) disclosed to other/selected lenders?

 

Normally a lender making the discovery would keep it to itself, but depending on the circumstances of each case and inter creditor relations the information may also be shared.

(e) If there were 2 or more lenders (not in a syndicate) involved with the same corporate borrower, is it likely that they would:

(i) join together to share information and endeavour to work out a common approach to the financial problems of the corporate borrower; or

(ii) act secretly and independently of one another?

 

This again depends on the relationship between the creditors. Expediency would demand that to save a dual or multiple exercise joint action would be initiated.

(f) If there was a group of lenders (whether in a syndicate or not) involved with the same corporate borrower, is it likely that one of them would offer or seek to be the leader on behalf of them all?

 

In a syndicate it is common for a lead bank to assume the role of negotiation. In other cases this may happen.

(g) If so, is it likely that such a proposal would be agreed to by the other lenders?

 

Probably.

(h) Is it likely that local lenders would have employees who are experienced in informal work outs?

 

Local lenders usually have employees who are experienced in informal work outs.

(i) If there was foreign bank lending involved, is it likely that domestic lenders would:

(i) combine with; or

(ii) act independently of the foreign lender/s?

 

Where foreign bank lending is involved the local bank will normally act in combination with the foreign banks.

(j) Is it likely that 'junior' or 'minor' lenders might seek to trade their debt?

 

Trading of debt by 'junior' or 'minor' lenders is not likely nor likely to meet with success.