Distressed Debt and Workout Solutions
UMB strives to meet the needs of borrowers and bondholders
Questions about distressed debt and debt workout solutions? UMB has answers.
Distressed debt refers to the debt obligations of a company or government that are at risk of default, in default or in the process of bankruptcy. To correct distressed debt, the parties work closely with the holders to determine the best path for resolution. This could include anything from a simple forbearance agreement to a more complex restructuring of the debt.
There are many legal and administrative complexities in managing distressed debt. The UMB Corporate Trust Team can navigate trouble spots as they occur and help protect bondholder value. For more information on UMB’s distressed debt solutions, contact our highly experienced UMB Corporate Trust team.
A debt workout solution is a strategy using legal and financial tools to help a company or government resolve its distressed debt. A third-party corporate trustee manages the debt workout solution. A workout specialist on the corporate trustee’s team will work closely with the holders to oversee the process — from establishing the strategy and onboarding, through managing turnaround and financial resolution for bondholders that leverage the debt securities.
You can also contact the UMB Corporate Trust team with any questions about distressed debt and debt workout solutions.
Before default, a corporate trustee’s relationship is largely with the borrower, the company or government in need of a distressed debt workout solution. But in the event of a default, the role of a trustee drastically shifts to support the investors (bondholders) to protect them and their investments as much as possible.
Experienced trustees like UMB have many tools to create a recovery strategy. Read more about how the trustee’s role changes when a municipal or corporate bond issuer defaults.
An indentured trustee acts on behalf investors who hold bonds or other debt securities issued by a company or government. When a bond issuer restructures under the protection of a bankruptcy filing, the indentured trustee’s role evolves:
- The trustee must determine if it can remain in its role or if the bankruptcy filing creates a conflict of interest. If so, the trustee must resign, according to the Trust Indenture Act.
- If the trustee remains in its role, it’s responsible for communicating with all investors about the process, helping them assemble and working closely with them to develop and implement a strategy that maximizes financial recovery.
- After a recovery strategy is implemented, the indentured trustee remains engaged throughout the process as a necessary partner to coordinate all parties involved until financial resolution.
Read more on the UMB blog about the role of indenture trustees in bankruptcies.