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Wednesday , March 20 2019

Mechanism of a collapsing company (4)

“You’re never a loser until you quit trying,” former American football player, coach and television commentator Mike Ditka.

After decisive reforms and quick fixes, focus shifted to the most important financial portfolio — the company’s bank debts. As I mentioned in previous articles, this company took loans from three banks. After perusing the debt’s portfolio, some observations needed to be reviewed.

Among these observations, records showed that the three loans were taken within a period of 30 months. Presumably, these loans were for development and expansion of the company as mentioned in the contracts with the banks.

In reality, most of these loans were invested in the stock exchange and then incurred dead and unrealized losses. The remaining money went to several officials under the clause, ‘emergency work fund’, which did not exist.

The company paid the first five installments — two were paid one time. After that, the payments stopped without giving the debtors any explanation. This prompted the banks to take legal action against the company.

Looking into the encumbered securities, it was found that the company’s securities can still continue as securities or collaterals for debtors. One of these collaterals is in the form of real estate property with steady income, almost fully operational with continuous cash flow and good value in the market.

Other collaterals were in the form of deposits. Since securities are considered the first strong defense line of a company, I could not stop wondering why the previous administration did not use them to prevent the company from collapsing in the initial stage.

Several meetings were held between the concerned departments in the company and the banks in an attempt to find solutions that satisfy all parties, especially since the legal process might go on for a long period. Therefore, reaching amicable settlement that protects the rights of each of the involved parties seemed the best road to take.

The company had very important tasks in this regard — request the banks to stop accumulation of interest on delayed installments and reschedule payment of the loans to be followed by a grace period, and before all that, withdrawal of cases from the court.

The recently mentioned solutions were not conditions, but initiatives from the company to allow it to restructure its financial condition and to seek help due to the situation it went through. The situation is considered a passing crisis although it almost led to liquidation of the company.

Everything that was put on the table did not touch the principal loan amounts and actual interests. Although the banks had their own proposals, all parties settled for what they regard as fair for everyone.

Personally, I considered the agreement realistic for all sides and a success for the company which was on the brink of collapse. This is in addition to the fact that the company has sufficient lifeline to recalibrate and restructure itself as it continues towards the rescue path.

Twitter: @alzmi1969

By Yousef Awadh Al-Azmi

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