BIS Review 18/2003  5
The standstill provides an essential breathing space during which accountants appointed by the company can report on its financial problems and prospects for survival, and the company can try to reorganize its business and management. Assuming that the company looks as if it is salvageable, the banks will normally be prepared to continue the standstill to allow proposals to be presented by the company’s financial advisers to restructure its debt, by for example extending its term, reducing the interest rate or even the principal amount and swapping debt for equity. If the shareholders are able and willing, it may also be possible for fresh capital or assets to be injected into the company to fill a hole in the balance sheet and to improve its income earning capacity. During the period of the standstill and while the restructuring plans are being formulated, it will be the responsibility of the lead bank appointed at the first all banks meeting to enforce the standstill, to negotiate with the company and its financial advisers and to share information with the other lending banks. The lead bank will be assisted in this process by a steering committee, normally consisting of about 4-6 banks. It is important to note that while the steering committee may recommend a restructuring plan to the bank group as a whole, it cannot commit them to it. This means that a workout can only go ahead if there is unanimous agreement among all the banks involved.