Mastering the Turnaround

Well-prepared CFOs have a detailed knowledge of their company's existing and expected compliance with the covenant and default provisions of all debts in the capital structure, Ball says. They also know the timing and extent of cross-default issues upon an "asserted" default. Of course, knowing the identity of the company's debtholders is critical, so much so that gaining some control over who can own the company's debt and trade it, by obtaining "consent rights" in lending agreements, may be worth an increased cost in exchange for the certainty. Don't assume a refinancing is readily available, that a "misguided or incorrect" assertion of a default or even acceleration is harmless, or that a lender will waive a violation, Ball says. And if a committee of debtholders knocks at the door or fires off a furtive letter to the board, engage them, don't slam the door. "Don't pick a fight you can't afford to lose," she adds. — V.R.

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