Restructuring Support Agreements (“RSA”) are legally binding arrangements that safeguard debtors and creditors during a bankruptcy proceeding. They are agreements made between a debtor and his or her creditors.

A RSA often defines the terms of a restructuring plan, such as how creditors are treated, asset distribution, and the timeline for the restructuring process. It also includes channels for the debtor to obtain funding, which is often necessary to fund the restructuring process.

Overall, RSA is a useful tool for organizations that are experiencing financial difficulties and need to restructure their operations. They enable debtors and creditors to work together to create a plan that benefits both parties and helps the company emerge from bankruptcy.

Key players involved

The company undergoing restructuring and the participating financial stakeholders who have executed or agreed to the restructuring support agreement are the key players in a restructuring support agreement. Debtors, creditors, and other persons with a financial interest in the corporation are financial stakeholders.

The restructuring support agreement describes the terms and circumstances of the restructuring as well as the assistance that financial stakeholders provide to help the restructuring’s implementation. The agreement may also include termination events, such as a longstop date, as well as the hope that more parties will eventually agree to the restructuring support agreement

Goals and objectives for restructuring support agreements

The goals and objectives of restructuring support agreements can vary depending on the specific circumstances and parties involved. However, some common goals and objectives of RSAs include:

• Debt reduction: One of the key goals of a restructuring assistance agreement is to minimize the debtor company’s debt burden. This can be accomplished through a variety of strategies, including debt forgiveness, debt-for-equity exchanges, and debt restructuring.
• Liquidity enhancement: RSAs often aim to offer additional liquidity to the debtor company to fund its ongoing operations during the restructuring process. This can be accomplished using debtor-in-possession financing or other types of capital infusion.
• Establishing a sustainable capital structure: Another purpose of RSAs is to provide the debtor company with a long-term, sustainable financial structure. This entails addressing the underlying financial concerns and ensuring the financial viability of the company’s future operations.
• Protection of creditors’ rights: RSAs intend to safeguard creditors’ rights and interests. This involves making certain that creditors are treated fairly and have the option to participate in the restructuring process.
• Negotiating terms and conditions: Negotiations between the debtor company and its creditors to obtain mutually accepted terms and conditions for the restructuring are involved in RSAs. Debt repayment schedules, interest rates, collateral, and other pertinent aspects may be evaluated.
• Approval and implementation of restructuring plan: RSAs frequently consider the approval and implementation of a restructuring plan, such as a reorganization plan. The goal is to have a clear roadmap for the restructuring process and to ensure that all parties engaged are on the same page. 

Negotiation process of restructuring support

In a bankruptcy procedure, RSA enables the parties to negotiate and agree on the terms of claim treatment and the course of the bankruptcy proceedings. The plan support agreement’s parties generally agree to particular commitments regarding the restructuring process. A corporation normally begins debt-restructuring negotiations with a common set of objectives to prepare for a restructuring negotiation with creditors. Lenders will concentrate on the cash flows that will service their debt and allow it to be paid. They are often more willing to get into debt restructuring negotiations if the company gives them the clear and thorough information they require to win internal approvals. If there are any concerns with intercompany or related party receivables, lenders will want them resolved.

Benefits of a restructuring support agreement

The RSA aids the debtor by committing creditors and others to a course of action within the confines of the bankruptcy process, thereby minimizing ambiguity. Here are some specific advantages of a RSA:

Benefits to the debtor:

• Creditor commitment: The RSA requires creditors to agree to support the debtor’s restructuring plan, which can assist the debtor to emerge from bankruptcy more swiftly and with less uncertainty.
• Reduced uncertainty: The RSA can help the debtor eliminate ambiguity by outlining a clear plan of action that creditors have agreed to support.
• Negotiated terms: The RSA specifies the negotiated terms of a reorganization, which can assist the debtor in achieving a better conclusion.

Benefits to the creditors:

• Protection of interests: The RSA safeguards creditors’ interests by ensuring that they are treated fairly and equitably in the bankruptcy proceeding.
• Clear direction and structure: The RSA provides clear direction and structure, which can aid in the process of streamlining and cutting costs.
• Greater influence: Creditors that collaborate with the debtor to create the RSA have a higher impact on the result of the bankruptcy procedure.

How we can help?

Our team can assist businesses in ensuring the successful implementation of solutions in the restructuring process.

Our professionals can help in choosing experts who will provide strategic guidance and aid in creating a stronger, more efficient, and agile organization.

Our experts can leverage restructuring support, which will maximize its benefits and achieve sustainable success in the end.