SolomonEdwards Final Site Logo-01
Search

Taking the Trouble out of Troubled Debt Restructuring

Taking the Trouble out of Troubled Debt Restructuring

Facing a pending liquidity shortfall, our client entered into an amended debt agreement with a complex restructuring that raised significant accounting questions—specifically, whether the amendment constituted a modification, extinguishment or a troubled debt restructuring (TDR). Under the terms of the amendment, the client was provided a “discount” on the amount previously due as well as a new term loan to provide additional liquidity. Recognizing the urgency and complexity of the matter, the client engaged SolomonEdwards for expert support to ensure accurate, timely reporting and alignment with audit expectations.

Challenge

Debt amendments require an analysis of whether the change is accounted for as an extinguishment or a modification. When a borrower is experiencing financial difficulty, additional analysis of whether it is accounted for as a troubled debt restructuring (TDR) is required. These types of analyses aren’t items that most accounting teams are accustomed to performing and the client recognized that they didn’t have the time or expertise in-house to perform the analysis and determine the proper accounting in a manner timely enough to meet their reporting deadlines.  

Solution

We brought our expertise in accounting for financing transactions to bear and were able to perform the analysis for the client and provide a model with all the necessary calculations for their reporting along with a technical paper that supported the accounting conclusions reached. Our service included working directly with their external auditors to ensure there was agreement on the accounting positions taken.  

Outcome

We determined that the client had to account for the transaction as a troubled debt restructuring and provided a turnkey service so they could meet their reporting deadlines. Our approach of working directly with their external auditors ensured there would be no audit issues or follow-up work necessary. The client acknowledged that both the expertise we brought to the engagement and our speed of execution were key in helping them understand the transaction and ensuring their investors had the information they needed in a timely manner.  

Industry

Deployment

Services

Recent Case Studies

Skip to content