Olga Yefremova: successful debt restructuring requires deep evaluation of business vitality

In spite of the large number of defaults on debt instruments during the crisis, the examples of successful restructuring in Russia are few. Meanwhile, a well-thought restructuring strategy can become a solution for those companies that are unable to meet their obligations owing to the changed market conditions. This idea was emphasized by Olga Yefremova, head of NOMOS-BANK Debt Markets Analysis Unit, who was speaking at the conference “Financial Recovery and Restructuring” held on 10th March in Moscow.

“Since Autumn 2008, the accumulated default Rouble-denominated debt instruments have amounted to circa 200 milliard Roubles, in addition to 1.35 milliard U.S. Dollars of debt instruments denominated in foreign currency”, — underscored the expert. She mentioned that the most vulnerable were such industries of the economy as agriculture, construction and development, financial sector (in this case — factoring, leasing and companies providing target infrastructural finance for Moscow Oblast (Moscow Oblast Mortgage Agency and Moscow Oblast Mortgage and Trust Company).

Despite the abundance of defaults, the statistics of successful restructuring cases are very scarce, stated Olga Yefremova. The focus of the discussions of the specifics of the process largely shifts to the legal field. Besides, the expert has noted that the restructuring does not allow the issuer to fully protect himself from a number of pitfalls, such as loss of the right of demand and loss of precedence right (albeit a moratorium is sometimes imposed on new debts), freeze of financial resources, which could be invested on more profitable terms. The head of NOMOS-BANK Debt Markets Analysis Unit has stressed additionally that in order to achieve final success, the restructuring programme must be well prepared. She warned against the so called “express restructuring” because, in her view, one cannot rule out new defaults if decisions are taken without thorough evaluation of the vitality of the business.