Corporate Restructuring Team: Insights

Lockton’s Corporate Restructuring Team Draws on Expertise from Advisors across the Country

Lockton’s Corporate Restructuring Team (CRT) has been advising companies on issues associated with restructuring, bankruptcy, and distressed business circumstances for over 30 years. The team has garnered substantial experience helping companies navigate through event-driven challenges, including 9/11, Hurricane Katrina, three industry cyclical downturns, the ’08 recession, and now COVID-19.

Though COVID-19 is new on the scene, Lockton’s Corporate Restructuring Team is not. Drawing on talent from 26 experts from all across the US, Lockton’s CRT evaluates complex insurance implications and sets clear strategies to preserve and position each company, its stakeholders, and employees for the best possible outcome. With over 200 bankruptcies and out-of-court restructures handled over the past 15 years, Lockton’s CRT is battle-tested, quick to act, and does not need to be educated on the issues.

Specific actions position companies for recovery.

  • Work with bankruptcy counsel to craft orders necessary to facilitate insurance coverage and payments of premiums and answer questions regarding insurance programs.

  • Coverage must be structured to cover all parties at exit. Accommodate for the possibility that officers of the company and shareholders may be different at the emergence of bankruptcy.

  • Prepare to amend or adjust technical specifics, as they vary by company and insurer, to ensure coverage is in place for bankruptcy.

Insurance plays an essential role in the variable expense and capital protection strategy.

Restructuring, Chapter 11 Bankruptcy, and their related processes are fast-moving, extremely challenging, and often very stressful. The confluence of COVID-19 and the upheaval in the energy industry has caused commodity prices and revenue forecasts to fall precipitously, in some instances by 80%. Liquidity, capital structure, and cash flow have become absolutely critical, and the need for speed in terms of decision making has accelerated to days and hours, instead of weeks and months.

The timing, extent, and plan of restructuring and exit plans impact insurance programs. Lockton’s team works with locally embedded claims attorneys and technical advisors to understand and evaluate best practices and strategies for clients’ distinct needs and circumstances. It is important to keep the following strategies top of mind when crafting solutions:

  • Engage in immediate, transparent discussions of restructuring plan with insurers.

  • Finalize run-off program and pre-fund premium, extending the existing program if necessary so that it remains in place during the bankruptcy.

  • Refine D&O coverage terms (i.e., Advancement of Defense Costs, Entity/Insured vs. Insured, Definition of Insured) and craft state-of-the-art run-off and post-emergence programs.

In recent weeks, the number of companies studying restructuring, planning for possible bankruptcy, preparing to enter bankruptcy, or seeking extraordinary financial assistance has exploded. All the while, insurance companies are contending with their own concerns, issues, and impacts arising from COVID-19. Clients facing bankruptcy should not be held up by insurers who are slow to act or new on the scene. The value of a “been there, have seen and done that” expertise cannot be overstated. Work with expert advisors who have long-standing credibility with executive leadership at insurance carriers worldwide, who have experienced every type of litigated issue related to restructuring transactions, and who collaborate with subject matter leaders, across disciplines.

Notably, Lockton did not create its corporate restructuring team in response to COVID-19/this latest crisis. Its team was already in place. For 30 years, Lockton’s CRT has proven it has the necessary experience and bandwidth to assist in times of need and bring companies strength and direction when crisis and disasters strike.