Ufuk Süleyman Oflaz

05Comparing financial restructuring and liquidation scenarios

Restructuring vs. Liquidation Comparison Analysis

An analysis model that compares financial restructuring (FYY) and liquidation on the same assumptions, showing which route gives creditors the higher recovery.

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The problem

In restructuring talks, the central question is whether creditors would be better off under the restructuring than in a liquidation. That question cannot be answered without systematically setting out liquidation values and the ranking of claims.

Why it matters

The comparison shows in numbers why a restructuring proposal is reasonable for creditors and puts negotiations on a common footing.

Approach

  1. List assets item by item with book value and estimated liquidation value.
  2. Define liquidation costs and the ranking of claims (secured, preferential, unsecured).
  3. Calculate the recovery rate of each creditor group in the liquidation scenario.
  4. Derive the same groups’ recovery rates from the restructuring cash flow projection and compare them.

What it examines

  • Liquidation value estimate by asset
  • Ranking of claims and creditor groups
  • Liquidation costs
  • Recovery rates by scenario
  • Restructuring vs. liquidation comparison table
  • Sensitivity analysis

Example output

A comparison table showing recovery amounts and rates for each creditor group under the liquidation and restructuring scenarios side by side.

Limitations

  • Liquidation values are estimates; independent valuation may be needed for significant assets.
  • The ranking of claims and legal procedures must be assessed separately under the relevant legislation.

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