Restructuring in the leisure sector: what does the future hold?
What steps can they take to manage risk?
For a long period during lockdown, many businesses in the leisure sector will have effectively been mothballed and directors understandably have been focused on survival. With the roadmap out of lockdown now in place, and a successful vaccination programme, management teams must ensure they have their own roadmap for managing their re-opening and navigating the inevitable challenges along the way. Throughout the process of re-opening, clear and honest communication with stakeholders will be key, including management teams, operators and equity or debt providers. Having well-informed stakeholders will improve the chances of reaching successful additional support or concessions, should a recovery journey hit bumps in the road. An aligned group of stakeholders in support of a recovery strategy will also reduce the likelihood of needing to switch to focus to value preservation or realisation, which may not optimise the outcome for all parties. Securing stakeholder support will require a clearly articulated strategy and a supportable recovery plan that can be stress tested, starting with an assessment of demand, valuation and consumer trends within a stabilised market in the medium to long-term. To undertake this assessment: Businesses and financial advisers should collaborate with independent real estate consultants with sector specific experience to provide appropriate legal, environmental and political analysis. Key conclusions from this will identify repositioning or capital expenditure requirements. A thorough analysis of key suppliers, licenses and employee resource should be undertaken to ensure that leisure assets can be safely and sustainably returned to operation. Failure of operational matters or a key supplier could irretrievably damage the recovery plan, a business and its reputation. A strong forecasting in the short and longer term with emphasis on underwriting consumer demand or trends, and cash requirements from trading, working capital absorption and capital expenditure. This includes unwinding of deferred liabilities, such as rent or Time to Pay (TTP) arrangements. Once the funding requirements of the recovery phase are understood, they can be compared to existing capital headroom availability, however, additional capacity could be constrained as a result of Government funding schemes. A robust plan to healthy business with a normalised debt capacity may also attract additional leverage, such as the Recovery Loan Scheme (RLS) or equity.
There is substantial capital in the marketplace, both debt and equity, available for deployment into businesses that can demonstrate value but are unable to secure support from existing stakeholders. Whether new capital partners remain with the existing stakeholders, or replace them, will be dependent upon on the situation, the business and the stakeholders. When management teams identify pressure points within their businesses, or challenges in their re-opening plans, it is important that they seek support as early as possible. This will lengthen their recovery runway – giving them, their advisers and their stakeholders the maximum amount of time to find effective, sustainable solutions.
With the roadmap out of lockdown now in place, and the successful vaccination programme, management teams must ensure they have their own roadmaps for managing their re-opening and navigating the inevitable challenges along the way. Phil Armstrong Restructuring Advisory
frpadvisory.com
frpadvisory.com
6
7
Made with FlippingBook - professional solution for displaying marketing and sales documents online