Business Strategies on
Cross Border Matters:
Choosing the Right Approach
BY JOFF MITCHELL, ZOLFO COOPER US &
SIMON FREAKLEY, ZOLFO COOPER EUROPE
In today’s fast-moving global economy, the ability to manage complexity is increasingly becoming a core
competency. For a U.S.-based company
with international operations in multiple
countries, however, the prospect
of a restructuring takes “managing
complexity” to a whole new level.
Issues unique to cross border situations,
along with the evolving legal landscape,
can present a maze of unexpected
complications. The good news is that
with careful planning and a strategic
approach, management teams can be
significantly better-prepared to take on
the challenges of global restructurings.
What follows is a summary of practical
steps and strategic considerations for
a company with significant foreign
operations preparing to file Chapter
11 in the U.S. The objectives are to
maximize enterprise value, preserve
control, and minimize disruptions
by intensifying focus in two areas:
planning and communication.
As a company with an international
footprint reviews its restructuring
consideration must be included
in the planning process:
1 Which foreign operations provide value?
2 In what jurisdictions do they reside?
3 What steps must be taken to preserve that value?
Weighing Value. International
restructurings are complex and can
create significant timing conflicts.
As with any restructuring, value
optimization is a key consideration
for creditor recovery, and control over
the process is of primary importance
in providing that optimization.
The first step is to determine
which foreign operations appear
to have value and which don’t.
Among the questions that must be
addressed for each operation are:
• Does the information available
accurately reflect its revenues and
costs? For a variety of reasons, costs
and/or revenues that may actually
relate to one operation may be
recorded in the records of another.
• Does it have positive cash flow
and adequate liquidity, not only
now but into the foreseeable
future? Is it adequately financed
currently, or can it be refinanced
locally, independent of corporate
guaranties, before the restructuring
actually occurs in the U.S.?
• Does the operation fit with the rest
of the organization? If not, should
it be sold instead of retained?
• Does it provide goods or services
to other likely viable parts of
the organization that cannot
be economically replaced?