General Information
Target Audience
Students who wish to understand how to diagnose corporate financial distress and evaluate the various legal and out-of-court options for alleviating distress. The course material appeals to a broad audience of potential managers, directors, creditors, turnaround and restructuring consultants, and investors in distressed assets.
Format
Intensive format over 2 weeks
Course Mission
This course aims to study the reasons why some firms find themselves in financial distress, alternative courses of action (including out-of-court and legal options) in response to financial distress, and the role of various stakeholders in the process.
Course Scope
Traditional business courses often deal with financially healthy firms. However, failure is an inevitable reality for many businesses.
The course intends to:
- Help students understand how to diagnose corporate financial distress and analyze internal and external warning signals. Students will be exposed to the use of financial statements and market-based models to estimate default risk;
- Help students understand the contractual tools used by creditors to monitor borrower performance, their accounting and reporting for problem loans, and likely actions upon violation of covenants;
- Help students understand the salient reporting issues that often precede an insolvency filing, such as impairments and going concern opinions;
- Help students understand the options available to companies in financial distress, including out-of-court restructuring;
- Familiarize students with legal process for liquidations and reorganizations, and understand the accounting, governance, and financial decision-making issues that arise during and after emergence from bankruptcy; and
- Expose students to the potentially lucrative area of investing in distressed assets.
Evaluation and Grade Distribution
| Component | Due Date | Weight |
|---|---|---|
| Individual Assignments x 3 | Every 2 to 3 days | 30% |
| Group Project | Last class meeting | 20% |
| Class Participation | Ongoing | 10% |
| Final Exam | January 14 (last class) | 40% |
Required Resources
Required Readings: Lecture notes and class handouts
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