Carts and Horses

Interesting document from Insol Europe Turnaround Wing to its members on guidelines for Restructuring Professionals in consensual restructurings. It introduces the concept of Restructuring and Turnaround Professionals (RTP); restructuring being defined as balance sheet restructuring and turnaround being operational turnaround.

Now isn’t that putting the cart before the horse? A trained turnaround professional stabilizes the cash flow first, changes the operations second to enhance value and only then negotiates a financial restructuring achieving the best results for the client from a more credible business plan.

The term Chief Restructuring Officer (CRO) emanates from the USA and Chapter 11 where the professional was both skilled in operational and financial restructuring managing the submission of a Plan of Reorganisation and implementing it ahead of negotiating the financial terms and the subsequent exit. It was later adopted in Europe but something has been lost in the translation mid Atlantic where a CRO is now seen as a Balance Sheet restructurer only and not an all-rounder with management skills. Hence understandable the Insol Europe misconception and the introduction of RTP as its members do not have operational management backgrounds. The CRO in Europe should be the CTRO or Chief Turnaround and Restructuring Officer.

Now don’t get me wrong. I welcome the guideline and its recognition of consensual restructuring as preserving more value than insolvency and it is a step in the right direction on promoting ethics and professional standards to consensual restructuring and in recognizing a primary duty to the client and not the secured creditor who may have been the referral source. But Insol Europe being an Insolvency organisation is coming at this from the wrong angle. CTRO and TRP (Turnaround and Restructuring Professional) puts the horse before the cart where it should be.

But why bother? There already exists a Certified Turnaround Professional qualification for consensual restructuring in ECTP (European Certified Turnaround Professional ) where professionals have to demonstrate proficiency through examination and experience in all three skillsets of turnaround; finance, legal principles and management and ethics. Is this just another defensive move by the Insolvency Profession just like the one that corrupted the term Chief Restructuring Officer?


Alan Tilley – Principal, BM&T

28th August 2015

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