GRA 6289 Financial Distress, Restructuring and Bankruptcy

GRA 6289 Financial Distress, Restructuring and Bankruptcy

Course code: 
GRA 6289
Department: 
Law and Governance
Credits: 
6
Course coordinator: 
Sjur Swensen Ellingsæter
Zhaneta Krasimirova Tancheva
Course name in Norwegian: 
Restrukturering og konkurs
Product category: 
Master
Portfolio: 
MSc in Law and Business
Semester: 
2021 Autumn
Active status: 
Active
Level of study: 
Master
Teaching language: 
Norwegian
Course type: 
One semester
Introduction

Teaching language will be both English and Norwegian. Exams may be given in both English and Norwegian.

A company is in financial distress when debt repayments are due, and it does not have enough cash to make the payments. In this situation, the company must either restructure its funding and operations or petition for the opening of liquidation proceedings. Restructuring efforts may involve selling off assets, negotiating more beneficial payment terms with creditors and/or performing financial restructuring through restructuring proceedings. To decide whether the company should be liquidated 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 proceedings – i.e., liquidation proceedings and restructuring proceedings. The main goal of this course is to provide students with this knowledge.

Learning outcomes - Knowledge

After completing the course, the student will have acquired knowledge on:

  • Norwegian and international bankruptcy law
  • the mechanics of liquidation proceedings and restructuring proceedings
  • the various types of claims that are relevant in bankruptcy proceedings
  • the different options available to a firm in financial distress
  • the duties of a financially distressed company’s board and CEO
  • the tradeoff between costs and benefits of debt
  • the tradeoff between restructuring and liquidation
  • the costs of financial distress
  • corporate divestitures
Learning outcomes - Skills

After completing the course, the student will be able to:

  • value a firm in bankruptcy
  • determine the legal effects of liquidation proceedings, including effects on transactions made prior to the commencement of the proceedings
  • analyze the extent to which a distressed firm can use restructuring proceedings to restructure its assets and liabilities
  • determine whether foreign bankruptcy proceedings will be legally binding in Norway
  • suggest proper action for a firm in financial distress
  • analyze investments in distressed firm securities
  • use models to evaluate credit risk and predict distress
General Competence

After completing the course, the student should be able to identify and understand the incentives of all parties involved when a firm ends up in financial distress.

    Course content

    Law

    Introduction to bankruptcy law. The parties involved and their interests. Overview of Norwegian liquidation proceedings.

    The conditions for opening liquidation proceedings. The position of secured creditors and counterparties to executory contracts. Transaction avoidance and the distribution of available funds among the creditors.

    Norwegian restructuring proceedings. Financing restructuring proceedings. The extent to which a restructuring proposal is binding on dissenting creditors.

    Duties of the board and the CEO of distressed companies. Out-of-court restructuring.

    Cross-border insolvency. Recognition of foreign insolvency proceedings under Norwegian law. US chapter 11 proceedings. Restructuring corporate groups.

    Finance

    Corporate financial distress and leveraged finance. Reasons for corporate failure. Leveraged finance market.

    Valuation of distressed firms. Valuation methodologies and challenges.

    Restructuring and the cost of financial distress. Corporate divestitures.

    Investing in distressed firm securities. The high-yield bond market.

    Credit risk and distress prediction models. Applications of distress prediction models.

    Case studies

    Lyondell Chemical Company (Harvard Business School case)

    H Partners and Six Flags (Harvard Business School case)

    Teaching and learning activities

    The course uses lectures, case discussions, and project assignments. Class discussions of current events are an important part of student learning in this class.

     

    Software tools
    No specified computer-based tools are required.
    Additional information

    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.

    Qualifications

    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 spesific 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.

    Teaching 

    Information about what is taught on campus and other digital forms will be presented with the lecture plan before the start of the course each semester.

    Exam categoryWeightInvigilationDurationSupport materialsGroupingComment exam
    Exam category:
    Submission
    Form of assessment:
    Written submission
    Exam code:
    GRA62891
    Grading scale:
    ECTS
    Grading rules:
    Internal examiner
    Resit:
    Examination when next scheduled course
    40No2 Week(s)Group (3 - 4)
    Exam category:
    Submission
    Form of assessment:
    Written submission
    Exam code:
    GRA62892
    Grading scale:
    ECTS
    Grading rules:
    Internal and external examiner
    Resit:
    Examination when next scheduled course
    60Yes3 Hour(s)
    • BI-approved exam calculator
    • Simple calculator
    • Bilingual dictionary
    • Book: Erling Christiansen og Bjarne Rogdaberg (eds), "Materialsamling i børs- og verdipapirrett"
    • Compilation of laws
    Individual
    Exams:
    Exam category:Submission
    Form of assessment:Written submission
    Weight:40
    Invigilation:No
    Grouping (size):Group (3-4)
    Support materials:
    Duration:2 Week(s)
    Comment:
    Exam code: GRA62891
    Grading scale:ECTS
    Resit:Examination when next scheduled course
    Exam category:Submission
    Form of assessment:Written submission
    Weight:60
    Invigilation:Yes
    Grouping (size):Individual
    Support materials:
    • BI-approved exam calculator
    • Simple calculator
    • Bilingual dictionary
    • Book: Erling Christiansen og Bjarne Rogdaberg (eds), "Materialsamling i børs- og verdipapirrett"
    • Compilation of laws
    Duration:3 Hour(s)
    Comment:
    Exam code: GRA62892
    Grading scale:ECTS
    Resit:Examination when next scheduled course
    Type of Assessment: 
    Ordinary examination
    Total weight: 
    100
    Student workload
    ActivityDurationComment
    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)
    Sum workload: 
    160

    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.