“Cash is King” — there is no situation where this statement is truer than in a restructuring context. A business restructuring can be precipitated by many factors but ultimately liquidity is a key factor in the restructuring process and outcome. As such, every restructuring scenario starts out with assessing liquidity, both short-term (the ubiquitous 13-week cash flow) and long-term. All constituents involved, especially lenders and other creditors, will have keen interest in the company’s liquidity, as it can significantly impact the timeline and dynamics of the restructuring process. A sudden or unanticipated shortfall in liquidity without the prospect of accessing capital can force a company to file a “freefall” bankruptcy; whereas ample liquidity can provide time and control to effectuate an out-of-court solution or an expeditious filing and exit. Various constituents, each with their own agenda, will jockey for position to influence or control the restructuring, but liquidity is one of the most critical factors in determining restructuring options for a company. This chapter discusses potential liquidity pressures and sources of liquidity, and their impact on the restructuring process.

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