Chief restructuring officers—role and identity
Chief restructuring officers—role and identity

The following Restructuring & Insolvency guidance note provides comprehensive and up to date legal information covering:

  • Chief restructuring officers—role and identity
  • Appointment
  • Key skills
  • Interaction with existing management
  • Role

In the initial stages of distress, the lending group or creditors' committee may request that an independent chief restructuring officer (CRO) is appointed within the debtor company as a precondition to continued restructuring discussions. The appointment reassures them that changes will be made, that the company is taking the matter seriously and should help facilitate future discussions.

Appointment

To be effective and to maximise the chances of a successful turnaround, the CRO must be appointed early on when the first warning signs of distress appear, such as:

  1. a ratings downgrade or the company or its securities placed on negative watch (see Practice Note: Impact of credit ratings downgrades) or a fall in share price

  2. excessive leverage giving little room for failure with missed milestones and profits warnings

  3. an overambitious business plan and failure to meet sales targets (often aggressively set based on the assumption of exponential growth) plus declining margins

  4. labour issue—an increase in employee grievances or employee turnover may signal problems on an operational level

  5. failure to react to advances by a competitor

  6. a build up of old inventory plus problems recovering aged receivables

  7. over-expansion in areas where there is no synergy or failure to properly integrate new businesses

  8. diminishing headroom under existing funding agreements

  9. over reliance on one large client or supplier which is reconsidering its contractual relationships