The restructuring of the liabilities of an entity acting in the energy sector might be a lengthy process, the duration of which depends on the magnitude of the liabilities, the entity's ability to generate positive cash flows and creditors willingness to accept financing risks inherent in the restructuring plan.
The first step is to determine the size and structure of the liabilities. At this stage:
- the actual amount and structure of liabilities with respect to different categories of creditors is established, on the basis of source documentation and entries in the accounting records,
- the estimated liabilities are divided in accordance with the criteria of importance and validity towards: employees, tax and social insurance offices, financial institutions and commercial creditors,
- the method and extent of communication is decided for each category of creditors.
The next stage is to define the repayment method and terms of the restructured liabilities, including the extent and conditions of redemption of part of the liabilities. At this stage:
- the possibilities of additional financing injections by the shareholders and/or financial institutions in the repayment period of the liabilities being restructured are determined,
- the repayment terms of tax and social security liabilities, and commercial creditors are determined
- the restructuring plan of the entity is formulated and approved,
- management tools regarding day-to-day planning and monitoring the financial position of the entity is implemented.
A key factor in the success of the restructuring of the liabilities is gaining the full control over the entity’s cash flows. This step requires:
- the activation of operations management tools and as a support
- the activation of sectional efficiency improvement programs.