Two Examples of Interview Restructuring Cases

Welcome to the third Restructuring newsletter, 

Today, we will have a bit of a different post in which we will go through two cases that can be really helpful to prepare for any level of restructuring interview. 

Basic Restructuring Case

ABC is an Internet company with $225 in cash and $1000 in historical investment in various Internet ventures that have modest negative operating cash flow. To mature these businesses to the point that they have value potential will require further investment of at least an additional $150 in total.

ABC’s only credit liability is $200 in 5% subordinated convertible notes maturing in two years. Its formerly high-priced stock (peak value $200 per share) trades at under $1 a share and the notes are trading at 25 because the market is skeptical whether or not the firm’s various negative cash flow businesses have value.

For simplicity, assume notes have no covenants, and ABC’s cash position essentially ensures there will be no payment default until maturity.

What would you advise the company to do?

Answer:

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