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CIRA: Restructuring and Turnaround Management

CIRA · Work through your exam, one topic at a time.

All guide sections

Restructuring and Turnaround Management

Restructuring and Turnaround Management tests the operating and liquidity work that precedes or accompanies a legal restructuring: diagnosing distress, stabilizing cash, designing operational and financial fixes, and managing stakeholders through a sale, DIP financing, or plan. Questions often ask you to choose the next action from a cash-flow or stakeholder fact pattern.

Core toolkit

  • Turnaround sequence: assess causes, runway, and covenant headroom; stabilize cash, vendors, and customer confidence; restructure costs, portfolio, and balance sheet; then implement with milestones.
  • The 13-week direct cash flow is the liquidity spine: it models receipts and disbursements, not accrual EBITDA, and sets a minimum operating cash cushion.
  • Levers include AR collection, inventory reduction, payment-term negotiation, overhead cuts, SKU and customer pruning, asset sales, and DIP or cash-collateral financing.
  • Stakeholder map: secured lenders, bondholders, trade vendors, landlords, unions, customers, and equity have different economics and leverage; plan support agreements and 363 sales can reduce holdout risk.
  • Operational KPIs-gross margin, contribution margin, days sales outstanding, days payable outstanding, backlog, and customer concentration-must tie to the cash forecast.

Worked example

Opening cash is $6.0 million; the minimum operating cushion is $3.0 million; cumulative 13-week net cash flow is −$4.5 million. Ending cash is $1.5 million, so the funding gap is $1.5 million. A credible plan might accelerate $0.8 million of AR, cut $0.5 million of discretionary spend, and secure a $0.2 million vendor accommodation-or arrange a $1.5 million DIP. The reasoning matters: each lever must be timing-specific and included in the weekly forecast.

Traps

Positive EBITDA with negative cash flow is common in distress; working capital and debt service can consume the difference. Do not use an annual budget as a weekly liquidity tool. Do not assume all AR collects at book value or all vendors continue shipping. Ignore DIP covenants and minimum-liquidity tests at your peril. A 363 sale is not automatically faster or better than a plan; process, lien, and stakeholder issues drive the choice.