Chief Restructuring Officers

Chief restructuring officers help companies that are facing serious financial and operational challenges such as liquidity concerns, rapidly deteriorating performance trends, refinancing risk, excessive leverage, loss of key management or clients, and/or sudden challenges caused by disruptive market forces, natural disasters, political unrest/armed conflict, regional or worldwide pandemics, or other factors. They are hired by the company’s board of directors or its chief executive officer (CEO) to determine if and how the business can be restructured. CROs typically are employed for one to three years until the company is either sold, goes through a bankruptcy filing, or is stabilized financially and operationally. Restructuring professionals are also employed as full-time staff by private equity and venture capital firms that have struggling portfolio companies, as well as by restructuring firms that provide services to creditors of distressed borrowers to help them maximize their financial recoveries.

The duties of CROs vary based on the mandate that they have received from the board of directors, CEO, or other stakeholders. [Stakeholders include the employees of the company, secured and unsecured creditors, equity/member interest holders, various official or ad hoc committees, and the U.S. Trustee’s office (if the company is in chapter 11 bankruptcy)]. A chief restructuring officer may handle every aspect of the restructuring process, or his or her job duties may be apportioned by the restructuring status of the company or by area of expertise within the business. In the first scenario, there might be a turnaround CRO, who oversees the task of restructuring operations or the balance sheet, or a sale CRO, whose main duty is to shepherd an asset efficiently though the sales process. There are also expertise-focused CROs. The work of CROs can be organized into the following categories:

• Strategic CROs, who investigate financial and strategic options and develop a cohesive financial and operation plan.
• Operational CROs, who diagnose operational and financial issues, develop a turnaround plan, and implement enhanced governance and controls.
• Financial CROs, who study debt and capital restructuring options, oversee negotiations with stakeholders, and develop a financial restructuring plan.
• Crisis management CROs, who serve as the day-to-day leaders during the restructuring process, while also coordinating financial, legal, and other advisors.

Duties vary for general CROs, but most assess the company’s current cash and liquidity positions by completing a 13-week cash flow forecast; develop profit improvement initiatives in order to help the distressed company save cash or increase profit; raise capital; manage and communicate with stakeholders; and develop a plan of reorganization and a plan for post-restructuring long-term success for the company. If filing for bankruptcy is an option because the company wants to use this strategy to reorganize or sell its assets, the CRO manages this process. If the business is to be sold (all or in part), the chief restructuring officer identifies and negotiates with prospective buyers and manages the entire sales process in collaboration with the CEO and company board.