Case Study: Financial Opinion Services

Solvency Opinion - Corporate Restructuring

Our Client

A U.S. holding company (and thirteen of its subsidiaries and affiliated entities) which, along with their other domestic and foreign affiliates, was recently acquired in a multi-billion dollar highly leveraged going private transaction by a U.K. - based private equity firm.

Situation

Pursuant to the terms of the senior loan, securitization bridge and mezzanine financing facilities entered into by the private equity firm in order to finance the acquisition, the U.S. parent company, and certain of its direct and indirect subsidiaries, was required to effect the legal, contractual and operational separation of the principal U.S. operating division from the rest of the business in order to allow for the securitization transaction as contemplated by the loan documents. Such separation involved the making, assumption, cancellation, repayment and/or allocation of certain inter-company loans; the distribution of certain receivables; the waiver of certain dividend arrearages; the transfer, contribution or distribution of certain assets or securities; the formation of new legal entities; the execution of certain related agreements; and the implementation of certain other transactions related to the organizational restructuring of the U.S. entities. In order to complete said restructuring, our clients requested that The Salter Group (i) provide certain assessments regarding one or more of the transactions or the restructuring (including preliminary indications of value for the companies and/or their assets), and certain proposed actions by the companies in connection therewith, to the companies and their respective legal, tax and other advisors, and (ii) render written opinions which address whether, immediately after and giving effect to the consummation of the transaction(s), on a pro forma and, where appropriate, consolidated basis, (a) the fair value and present fair saleable value of certain company's assets would exceed its stated liabilities and identified contingent liabilities, (b) the company should be able to pay its debts as they become due, and (c) the capital remaining in the company after the consummation of the transaction(s) would not be unreasonably small for the business in which it is engaged.

Key Issues/Services

Assisting management in preparing forecasts for more than one hundred operating divisions and subsidiaries, within three weeks of being engaged, in order to assess the financial wherewithal of each company to satisfy its future debt obligations and to conduct its business following the consummation of the restructuring
Evaluating each company's business plans and forecasts with reference to our familiarity with industry growth rates and market conditions in order to bolster the defensibility of our advice and financial opinions
Reviewing the draft corporate minutes, resolutions, transaction documents and officer's certificates to assess whether the transaction documents and restructuring plan were consistent with the pro forma financial statements, management forecasts and our solvency opinions
Leading the coordination efforts among the company executives, legal counsel and accounting firm
Delivering additional surplus capital opinions to those companies incorporated in Delaware and Connecticut
Completing the assignment in five weeks with the prospect of a material covenant default if the restructuring was not consummated in a timely manner

The Salter Group's Role & Outcome

We delivered presentations to various Boards of Directors outlining our financial analyses under the three separate solvency tests for twelve companies
We rendered twelve solvency opinions in order to allow for the timely consummation of the various restructuring steps and related transactions.

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