Mandate to evaluate financial instruments in the context of the debt collection of a travel group undergoing restructuring

Mandate description

Mandate carried out on behalf of a tourism group as part of a debt raising and renegotiation with financial institutions and private investors.

The mission aimed to assess market value and implied return of existing debt instruments and to model the target structure of new debt.

The objective was to ensure consistency between the valuation of convertible bonds, the group's future repayment capacity, and the return requirements expected by lenders.

Key issues

The main challenges consisted of:

• Measure the economic value of debt instruments in a context of high risk of default;
• Calibrate a market rate of return adapted to the financial structure of the post-restructuring group;
• and simulate different conversion and refinancing scenarios to anticipate the impact on the capital structure.
  

The evaluation used several analysis tools:

• one risk-free yield curve modeling and the sector-specific credit spread;
• one valuation of the optional component convertible bonds using the adjusted Black-Scholes model;
• And a secondary market liquidity analysis to estimate the current market value of debt.

Approach and results

The work made it possible to determine a fair market rate for debt renegotiation and to assess the impact of refinancing on the balance sheet structure.

This evaluation constituted a essential support to discussions between financial management, creditors and institutional investors.

The mandate was in line with the group's business valuation, in order to ensure the methodological and financial consistency of the restructuring plan.