Context
A customer requesting a restructuring wants, in effect, to convert several debts into one. But at disbursement, the instalment loans and card balances being consolidated had to be settled manually. That both lengthened the transaction and carried a risk: if the new loan was disbursed but the old debt not settled, the customer's total debt rose instead of falling. The purpose of a restructuring and its outcome could come apart.
Approach
- Settlement of the instalment loans and card balances under restructuring was designed to occur systemically at the moment of disbursement.
- The principle was adopted that settlement occur within the same transactional whole as the disbursement.
- Improving the existing system and rebuilding from scratch were assessed as comparative alternatives.
- Manual steps on the branch side were reduced, shortening transaction time.
Outcome
- The gap between disbursing the new loan and settling the old debt was closed.
- The time to fulfil a restructuring request shortened.
- Transaction error risk tied to manual settlement fell.
- The customer's post-restructuring total debt position became predictable.
This case study describes the project through its scope and approach. Client name, commercial figures and performance metrics are withheld under confidentiality obligations.
What This Project Left Behind
The success of a restructuring depends less on the terms of the new loan than on whether the old debt genuinely closes. This is the most frequently overlooked point in corporate restructurings too: a protocol is signed, but which of the old obligations ends, when and how, is not written down. A restructuring that does not reduce debt merely extends its maturity.
- Banking & Credit Process Advisory — Strategic advisory on restructuring distressed loans, financial analysis, negotiation preparation and process management with banks.