GRA 6289 Financial Distress, Restructuring and Bankruptcy
GRA 6289 Financial Distress, Restructuring and Bankruptcy
Teaching language will be both English and Norwegian. There may also be exams given in English.
A company is in financial distress when debt repayments are due and the company does not have enough cash to make the payments. In this situation, the company must either restructure their funding and operations or declare bankruptcy. Restructuring efforts may involve selling off assets, negotiation with creditors, and/or performing financial restructuring. To decide whether the company is in fact bankrupt or if there are grounds for continued operations, it is necessary to have deep knowledge of financial and legal rules pertaining to financial distress and bankruptcy. The main goal of this course is to provide students with this knowledge.
After completed course, the student will have acquired knowledge on:
- Norwegian and international bankruptcy law
- the mechanics of bankruptcy
- the various type of claims that are relevant in bankruptcy proceedings
- the different options available to a firm in financial distress
- the duties of action and equal treatment of shareholders in bankruptcy
- the tradeoff between costs and benefits of debt
- the tradeoff between restructuring and bankruptcy
- the costs of financial distress
- central and important EU/EEA directives and regulations
After completed course the student will be able to:
- value a firm in bankruptcy
- suggest proper action for a firm in financial distress
- deal with cross-border restructuring
- use Credit Default Swaps to hedge credit risk
After completed course the student should be able to identify and understand the incentives of all parties involved when a firm ends up in financial distress.
- Introduction to bankruptcy.
- Company analysis: Pledges, types of creditors (bonds & banks, secured & unsecured), number of shareholders, credit facilities.
- The tradeoff between costs and benefits of debt. The mechanics of bankruptcy. The tradeoff between restructuring and bankruptcy. Costs of financial distress.
- Case: Restructuring JAL. HBS.
- Stakeholders/overview of players: Majority and minority shareholders, employees, creditors and contractors, societal interests.
- Insolvency and bankruptcy law: Illiquid and insufficient
- Mandatory equity levels (forsvarlig egenkapital) and duties of action (handleplikt ved lav egenkapital). Equal treatment of shareholders (likebehandlingskrav)
- Discount private placements (kriseemisjoner)
- Restructuring: Intercreditor agreements, bondholder meetings, asset sale, demerging, etc.
- Divestitures. Equity carve-outs. Spin-offs. Split-ups. Split-offs. Tracking stocks. Leverage recapitalizations.
- Case: Restructuring at Nova Chemical Corporation. HBS
- Listed companies in financial distress
- Case: SAS in crisis.
- Getting control in bankruptcy.
- Economic vs. financial distress. How does initial capitalization contribute to financial distress? Control in bankruptcy, cross-border legal issues.
- Case: Restructuring Navigator Gas Transport PLC. HBS.
- Post-reorganization equities and bankruptcy dynamics.
- Distressed investing, debt exchanges and loan-to-own strategies. Valuation of bankrupt firms.
- Case: H Partners and Six Flags. HBS.
- Debtor-in-possession (DIP) financing
- Restructuring of complex capital structure. Comparing bankruptcy laws in different countries. DIP financing. Creditor conflicts and recovery. Intercorporate guaranties.
- Case: Lyondell Chemical Company. HBS.
- Credit Default Swaps (CDS)
- Credit derivatives and hedging credit risk. Debtholders incentives to negotiate. Credit derivatives and macro risk.
- Case: Delphi corp. and the Credit Derivatives Market. HBS.
The course uses lectures, case discussions, and project assignments. Class discussions of current events are an important part of student learning in this class.
Please note that while attendance is not compulsory in all courses, it is the student’s own responsibility to obtain any information provided in class.
All parts of the assessment must be passed in order to get a grade in the course.
All courses in the Masters programme will assume that students have fulfilled the admission requirements for the programme. In addition, courses in second, third and/or fourth semester can have specific prerequisites and will assume that students have followed normal study progression. For double degree and exchange students, please note that equivalent courses are accepted.
Covid-19
Due to the Covid-19 pandemic, there may be deviations in teaching and learning activities as well as exams, compared with what is described in this course description.
| Assessments |
|---|
Exam category: Submission Form of assessment: Written submission Weight: 40 Grouping: Group (3 - 4) Duration: 2 Week(s) Exam code: GRA62891 Grading scale: ECTS Resit: Examination when next scheduled course |
Exam category: Submission Form of assessment: Written submission Invigilation Weight: 60 Grouping: Individual Support materials:
Duration: 3 Hour(s) Exam code: GRA62892 Grading scale: ECTS Resit: Examination when next scheduled course |
All exams must be passed to get a grade in this course.
| Activity | Duration | Comment |
|---|---|---|
Prepare for teaching | 6 Hour(s) | Case preparation (if relevant). |
Student's own work with learning resources | 85 Hour(s) | Including preparation for class. |
Teaching | 36 Hour(s) | Including any case presentation (if relevant). |
Group work / Assignments | 30 Hour(s) | |
Examination | 3 Hour(s) |
A course of 1 ECTS credit corresponds to a workload of 26-30 hours. Therefore a course of 6 ECTS credits corresponds to a workload of at least 160 hours.