Commentary on the book by Richard Marney & Timothy Stubbs

Corporate Debt Restructuring in Emerging Markets – A Practical Post-Pandemic Guide

September 20216 min readRisk, Emerging Markets

Unlike during the 2008 Global Financial Crisis where the financial system was a fundamental driver of market collapse and ensuing macroeconomic decline, today’s well-capitalized financial institutions have had to play a crucial containment role in the current, pandemic induced shocks. Combined with supportive government macro-prudential, fiscal and monetary policy interventions, banks and other financial intermediaries have acted positively to limit damaging fall-out from decreased social mobility and business activity. The tools employed addressed pressing liquidity and debt service requirements, as well as the need to waive temporarily financial covenants. The restructuring activity within lending institutions figured centrally in this work. Given the scale of the task, many institutions were forced to draft-in personnel from elsewhere to complement typically under-staffed restructuring (or work-out) units. To a surprising degree, the fire-walls have held. However, even when discounting the severe threat of new variants, complaisance may be misplaced. Lower growth trajectories, enterprise destruction, disruption of supply chains, and depletion of capital and working capital buffers (amongst other factors) could well create a subsequent deterioration in asset quality, with knock-on effects on profitability and solvency. Continued vigilance is thus warranted. 

A practical challenge in this ongoing response stems from the nature of workout activity and hence the requisite skill set. Restructuring negotiations frequently revolve around the personal and institutional context of the actors, as much as the financial fundamentals of the case. An understanding of such “soft” factors and how to manage people and process accordingly are essential ingredients for successful outcomes. Real-life experiences at the negotiating table, good and bad, rather than just a grasp of corporate-finance and legal theory, lie at the base of a competent workout specialist. 

In the non-performing loan restructuring arena, if you were to ask a question to anyone involved – bankers, lawyers, company owners/entrepreneurs, consultants to name a few - on how they managed a successful restructuring, they will have a story to tell; a story that most of the time is long, windy and “how the other side never understood” but perhaps also comes with a happy ending (although not guaranteed…). The issues at hand when restructuring over-indebted companies are highly complex, sometimes painful as parties seek to ascertain and apportion losses in most cases, humanly difficult as egos collide, legally complicated as the old balance sheet situation gives rise to a new challenge.” - Ilir Fani (Director of Corporate Recovery, EBRD)

The challenges bespoke work-out transactions pose in the context of emerging markets (EMs) are even greater than in developed economies. EMs’ insolvency laws, judicial systems, a nascent rule of law, business culture and other factors create a premium on a consensual (i.e., contractual) approach to debt restructuring. The INSOL principles, whilst not yet uniformly applied in EMs, provide an excellent conceptual framework for resolving financial distress. Workout specialists who can combine the softer, people-management skill sets with the knowledge of EM realities will be in high demand. 

Whilst no book alone can substitute for actual experience, Corporate Debt Restructuring in Emerging Markets: A Practical Post-Pandemic Guide attempts to fill partially the experience gap for finance, legal, regulatory and other professionals in the restructuring field. The objective is to convey the actual practice and real world of multi-creditor consensual restructuring transactions of debt in the private (non-sovereign) sector in both financial institution and corporate borrowers in EMs. The work is premised on the value of “war stories”. The authors employ a narrative-based approach, centered around five sequential phases of a restructuring from the build-up through resolution. The fictional stories presented are mosaics, with individual elements – markets, companies, commercial and financial factors, and people - drawn from many real-life cases and are designed to highlight key learnings.

In the first phase –  Pre-Restructuring – like the advice from a caring family doctor, the focus is on prevention. This starts with sound credit analysis at the time of the initial investment decision and continues with clear-eyed and rigorous monitoring throughout the life of the asset. The doctor metaphor continues into the second phase – the Decision to Restructure - where unpleasant truths must be confronted and acted upon, however much the patient objects. Once the parties agree that an “operation” is necessary, the process moves to the third phase – Set-up. Cliches abound about first impressions, starting off on the right foot, etc. Their basic message is of extraordinary relevance for this stage of workouts. The parties must show mutual consideration, recognize conflicting interests and be prepared to compromise, but demonstrate at the same time a willingness to take hard decisions, even at the risk of a winddown or bankruptcy. The failure to connect from the outset as respectful and responsible partners risks poisoning what can be a fraught negotiating process in the best of times. Phase four - Structuring and Negotiation  - can be best summed up with two quotes cited in the book:

“You can’t always get what you want.” - Sir Michael Philip Jagger and Keith Richards

On matters of style, swim with the current. On matters of principle, stand like a rock. - Thomas Jefferson

Accept detours in pursuit of the common objective – the least bad outcome for all – but only up to a point. The final phase - Implementation  - sees completion of the agreement amongst the parties and execution of the identified solution.  Honest disagreements and rogue creditors lurk as dangerous shoals close to shore.

It Ain’t Over till It’s Over - Yogi Berra

Post completion, there is the last challenge of competent operational governance to ensure successful performance, best handled with “boots on the ground.” Throughout the process, calmness, respect, creativity, flexibility and, when necessary, rock-solid firmness are necessary personal attributes. Transaction leadership also plays a crucial role by “walking the talk” and keeping the parties focused on the endgame.

This book is being published at an opportune time. The global community is striving to win the race between vaccinations and new variants. To be sure, the distance to the finish line is unclear. Even when the tape is broken,  the fiscal and external imbalances exacerbated during the pandemic in many emerging and frontier markets will remain and weigh on growth. In this context, the incidence of financial institutions and end-borrower restructurings may well be with us for a long time. Informed parties on both sides of the negotiating table will serve global markets and their shareholders well.


To meet the authors and hear their "war stories" first hand, watch our webinar with Richard, Tim and special guest Oleg Ivaniychuk: Straight Talk: Behind the Scenes of Corporate Debt Restructuring in Emerging Markets | responsAbility

The book Corporate Debt Restructuring in Emerging Markets – A Practical Post-Pandemic Guide can be ordered from Palgrave: Corporate Debt Restructuring in Emerging Markets - A Practical Post-Pandemic Guide | Richard Marney | Palgrave Macmillan


Richard Marney is a senior advisor for risk management at responsAbility Investments AG, a Zurich-based development finance-focused asset management firm. He previously served as the firm’s chief risk officer. Prior to responsAbility, Richard had a broad and varied 40-year career in emerging and frontier markets banking and principal investing, with senior-level business and corporate development, risk-management, and operating roles, including with BNY-Mellon and JP Morgan. Richard currently sits on a number of boards of directors in the emerging markets, including the African Guarantee Fund, Trustco Group Holdings (Namibia), Mikro Kapital (Moldova, Belarus and Romania), and Finca (Armenia). He is a graduate of the Johns Hopkins University, Nitze School of Advanced International Studies.

Timothy Stubbs is a partner with the global law firm Dentons. He heads the firm’s Russian Banking and Finance Group. Tim has worked on emerging markets transactions with Dentons (and its legacy firm Salans) since 1992, having previously practiced law in Chicago and New York. Tim also worked for two years in the Office of General Counsel of the European Bank for Reconstruction and Development (EBRD) in London on working sabbatical. Tim has led numerous debt restructurings as well as financings of all types, including bilateral and syndicated lending, real estate finance and project finance. He is the author of the Russia Country Chapter in Collier International Business Insolvency Guide. Tim is a graduate of the University of Michigan Law School and Center for Russian, East European & Eurasian Studies.

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