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Managing Liquidity in Turbulent Times

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Managing Liquidity in Turbulent Times Managing liquidity in Turbulent Times July 2020 In the current market environment, companies are enduring challenges in meeting their debt obligations. A structured coordinated response is the best path to success in such conditions. Economic downturn and COVID-19 has impacted most of the key business segments adversely and exacerbated the already existing stress in the economy. Typical business models were largely trade finance dependent or working capital intensive. impacting As businesses face challenges in recovering outstanding receivables in a timely manner, the working capital positions are being stretched. Factors businesses in Bahrain This is coupled with declining revenues, margin erosion and a fundamental change in consumer behavior. These factors are leading to Long working capital Stressed balance sheets Unproductive assets cycles Delay in payments (both Default in debt Cash flow issues operational and financing) payments Organizations that do not face these challenges head on, understand the options and manage critical stakeholders, run the risk of financial impairment and potential business failure. Government aid amidst highly uncertain times Stimulus packages across the GCC were early-on, and included several common policy actions, including interest rate cuts, liquidity enhancing measures, support for local employees, and deferment of loans. Support has also been extended to SMEs and sectors most affected by the pandemic such as tourism, hospitality, and aviation. Nevertheless, with fears of a stronger second wave, combined with a negative outlook for oil prices, extending the same level of stimulus have become a matter of concern, and models for a post-pandemic world has become needed. ©2020 KPMG Fakhro, a Bahrain partnership registered with the Ministry of Industry, Commerce and Tourism (MOICT), Kingdom of Bahrain and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 1 KPMG’s service offerings to help you achieve your goals • Liquidity/ Working • Roadmap to future capital management growth • Cash flow • Turnaround strategy and Liquidity Turnaround management business revival plan Management • Contingency planning • Strategy-to-execution business improvement KPMG Restructuring • Independent Business Services • Fund raising for Reviews distressed business • • Special situation M&A Business Reorganization (Operational, Strategic, • Sell-side and auction Financial) Financial Near process management Restructuring Bankruptcy • Divest out non-core assets • Insolvency • administration Debt refinancing and debt restructuring Debt Restructuring Mandates A typical Debt restructuring engagement, would constitute of three mainstages: . Independent Business Review / Options Assessment - Financial health diagnostics - Identification of pain points - Assess the funding gap - Explore restructuring options - Debt reduction strategies . Turnaround Plan - Structure selected option framework - Revise business strategy - Incorporate IBR recommendations - Update financial projections . Negotiations with Lenders / Financing Closure - Leading negotiations with banks - Finalize legal documentation - Infusion of new money / rescheduling of existing debt - Post rescheduling monitoring ©2020 KPMG Fakhro, a Bahrain partnership registered with the Ministry of Industry, Commerce and Tourism (MOICT), Kingdom of Bahrain and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 2 KPMG's framework for stabilization, value recovery and value creation At the heart of a turnaround are stabilization and value recovery. Our range of capabilities allows us to provide a comprehensive solution. Business as usual Stress Distress Stress New normal Company behind plan Crisis cash Organic Finance/liquidity management Transition to growth concerns Customer operations management Business model Aggressive leadership M&A disruption Scenario programmed Fraud planning management Loss of management Turnaround Reputational damage Transformation planning Strategic Regulatory change planning Supply chain and execution planning Failed M&A resilience transaction Failed integration Solution design Customer/supply Quick-hit chain stress realization Stabilize and Triggers Value recovery Value realization protect value Crisis cash Strategic cash Liquidity Tactical working capital management performance improvement Planning (and benefit delivery) of Rapid delivery of Rapid cost reduction Transformation sustainable business sustainable profit and spending controls improvement and reorganization improvement/cost reduction Create the team and Agree and implement Turnaround Stabilize/get a grip conditions to sustain the recovery plan the turnaround Financial Lender advisory/refinancing restructuring Insolvency planning — KPMG Deal Advisory team had recently assisted a client operating in the industrial sector in assessing their financial position. — KPMG devised a financial restructuring framework to address the immediate capital needs and restructure the outstanding working capital loans so that business could regain normalcy once the working capital cycle is restarted again. — In addition, KPMG had further supported the shareholders in recommending a turnaround plan Case Study that identifies key business issues adversely impacting profitability and measures that would revive sales and put the company back on the growth path. — The team steered the end-to-end negotiation process with lenders to raise debt and devise a restructuring framework that would be acceptable to both borrower and lenders. © 2020 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Hong Kong, China. 2 ©2020 KPMG Fakhro, a Bahrain partnership registered with the Ministry of Industry, Commerce and Tourism (MOICT), Kingdom of Bahrain and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 3 Contact us for more information on how KPMG can help you navigate the current market challenges, and implement necessary measures to achieve your goals C N Ramachandran Anshul Deobhakta Sr. Partner, Head of Advisory Director, Advisory KPMG Fakhro Head: M&A and Restructuring Tel : + 973 1721 5092 KPMG Fakhro Mobile : +973 39679138 Tel : + 973 1722 2380 [email protected] Mobile : +973 38381209 [email protected] kpmg.com/socialmedia The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. The KPMG name and logo are registered trademarks or trademarks of KPMG International. ©2020 KPMG Fakhro, a Bahrain partnership registered with Ministry of Industry, Commerce and Tourism (MOICT), Kingdom of Bahrain and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. .
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