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Managing problem loans

Course objective

By the end of this course, participants will:

    1. Understand the normal process of corporate failure, and understand that failure is the last step in a chain of events, not the first;
    2. Appreciate the major causes of failure;
    3. Be aware of the financial and non financial signals of impending failure; the ways in which borrowers attempt to disguise those signals, and how to structure their banks' monitoring protocols to highlight the signals, so as to identify impending failure early, rather than late in the process;
    4. Know what immediate steps to take on becoming aware of a possible corporate failure;
    5. Know, and be able to apply within their bank, the steps necessary to:

        1. Take control of a failing business;
        2. Obtain the information necessary to determine an appropriate strategy for each failing borrower; and
        3. Determine and implement a strategy specific to each failing borrower.
        4. Decide how to maximize cooperation from uncooperative borrowers.
        5. Implement that strategy so as to maximize the recovery and/or minimize the institution's loss.
        6. Work with other lenders - whether in a formal syndication or otherwise - to minimize conflict between lenders.
        7. Use of other modalities to strengthen lenders' position, such as formal and informal mediation, aggressive collection action, etc.
        1. Understand the interaction between problem loan management and the legal environment in their country; and
        2. Be aware of a number of specific legal issues that either do complicate, or have the potential to complicate, the effective management of problem loans within their country.

Australian problem loan specialists, building on the lessons learned from the failures of the 1980s and early 1990s, have been at the forefront of problem loan management work across Asia. This course has been designed and written using the knowledge gained both in Australia and working in Asia over the past 12 years.

This course has been presented in ten countries in Asia, in South Africa and in Netherlands over the past few years. It is successful because it provides a combination of Australian problem loan experience and very deep practical experience derived from managing problem loans in countries as diverse as Pakistan, India, Sri Lanka Nepal, Bangladesh, Philippines, Indonesia and Thailand.

The course makes extensive use of case study materials based on cases in several of these countries. The case studies are presented in a variety of ways, to maintain participant interest. The course is presented in a highly interactive way to ensure that all participants take part in the discussions, introduce issues of concern to them, and are given the opportunity to challenge approaches that they may initially consider inapplicable to their country

Course duration
Three days

Presenter
Andrew McRobert, or presenter trained by him. An abbreviated curriculum vitae of Andrew McRobert can be viewed here.

Course agenda
A copy of the 'standard' course agenda is attached below. The course has been designed in a series of modules. In respect of each country in which it is presented, a number of changes are made to the 'standard' model, in order to make it country specific:

    1. References to mandatory accounting policies are changed to reflect the current position in the country;
    2. A legal practitioner in the country in question presents the segment on day 3 on the legal environment in that country for problem loan management.

In addition, the course may be amended, if required, as follows:

    1. Substitution of case studies drawn from the financial institution's own portfolio;
    2. Inclusion of additional material on topics of particular interest to a specific financial institution; and/or
    3. Any other modifications that a client considers necessary.

Basic Course Agenda
Participants will receive their own autographed copy of "Corporate Collapse" by Andrew McRobert and Ronnie Hoffman.

Date Session Title Case Study
Day 1 AM
  1. Understanding the business environment in which companies operate
  2. Understanding why companies fail – if the cause(s) can’t be identified, the solution cannot be identified either
J & K Manufacturing

PT Arirang Bintang Indonesia-part I

Day 1 PM

1. Warning signals of potential failure:

  • Financial signals
  • Non-financial signals

2. Identifying the appropriate strategy:

  • Due diligence, investigating accountants’ reports, expert advice, etc.
  • Issues arising from the globalised financial market, the global financial crisis, the spread of derivative products
  • Meaningful dialogue with stakeholders:
    • Other lenders & different levels of priority
    • Actual & contingent creditors
    • Minority shareholders, the controlling family & others
    • Government agencies
    • Franchisees & others

Grey Manufacturing Exercise on fraudulent ratios


In tray exercise

Day 2 AM

How a bank should handle problem loans:

  • Reliable, accurate, meaningful & relevant forecasts
  • Selecting the appropriate strategy
  • Dealing with the borrower’s immediate needs
  • Implementing a bank-relevant reporting system within the borrower
  • Establishing & maintaining approvals within the bank

Puerto Labamba Sugar Mills

Day 2 PM

Restructuring:

  • Identifying the sustainable business
  • Devising the appropriate structure through understanding the respective strengths & weaknesses of the various parties
  • Contributions towards the restructuring:
    • In countries with a British legal system
    • In countries with other legal systems
  • Dealing with non-core businesses
  • Dealing with non-core assets
Dealing with intangible & incomplete assets
Selected mini-cases
Day 3 AM

Alternative approaches when negotiations fail:

  • Litigation
  • Aggressive collection
  • Arbitration
  • Mediation
  • Review of director conduct & preferential payments
Property-sell or hold
Day 3 PM

Understanding the legal environment, and legal issues, including:

  • Shadow directorships
    Lender liability
  • Environmental risk
PT Arirang Bintang Indonesia-part 2

contact details

South Africa: +27 82 447 4256

Australia: +61 402 048 326

E-mail: amra@amcrobertandassocs.com.au