Best Books for Financial Restructuring
Restructuring roles have become more and more sought after as students and career changers start to better understand the appeal of this hidden corner of investment banking.
Restructuring advisors assist either companies (also called debtors) or creditors in considering their options when a company is facing financial difficulties, often making use of a range of different corporate finance skills such as detailed financial modelling, valuation, and leveraged finance to work on unique (and sometimes chaotic!) transactions.
Given the focus is on saving companies (on the debtor-side) or maximizing recoveries when working for creditors, the demand for restructuring is counter-cyclical and thus the deal flow increases significantly when the global economy is going sideways – if you are looking for a career hedge to protect yourself from a macroeconomic downturn, there’s no better place to be!
Breaking into this industry is definitely challenging given the range of skills required to perform well in this role (more on this later), but, as ever, we can always draw upong books to get some of the theoretical background necessary to fully grasp what restructuring actually entails.
Key Learning Points
- Restructuring investment banking roles are increasingly in demand.
- Working in restructuring involves applying a range of corporate finance skills into unique (and sometimes chaotic) transactions.
- Books provide some of the theoretical background necessary to fully grasp what restructuring entails.
- Understanding the theory is a good starting point, but more practical knowledge is also necessary to break into the industry and perform well.
The Best Books for Financial Restructuring are:
To save readers from endless searching on the web for the right source of information, I have listed some key books to help you in your restructuring journey. These are not listed in any order of priority, so feel free to start reading the book that interests you most.
Arguably the most comprehensive book on the list, Moyer will walk you through all the financial and legal analysis that restructuring practitioners perform in every deal. Divided into 12 chapters, this book covers the whole cycle of restructuring, with deep dives into the causes of financial distress and how to alleviate (or even profit) from these situations. There are also specific chapters covering key leveraged finance points (which are also very important in restructuring) such as leverage and the concepts of credit capacity and support, plus some thoughts on capital structure and the management of credit risk
Although being very thorough regarding its content, bear in mind that this book was written in 2005, therefore some of the techniques described might be a bit outdated or even superseded by more recent legal developments and/or precedents.
About the author: Stephen G. Moyer has been a portfolio manager and analyst in the Distressed Credit Group at Pacific Investment Management Company (PIMCO). Mr. Moyer has over 25 years of experience in investment analysis and corporate finance. His interest in distressed securities analysis began when he was a member of the High Yield Research Group at Drexel Burnham Lambert (Source: Amazon).
In this book, Whitman moves away from the technical depth of Moyer’s Distressed Debt Analysis and offers something more succinct and focused on the practicalities of restructuring – he touches on the key technical aspects you need to know in a direct fashion.
Towards the end of the book, Whitman dedicates three full chapters to case studies that cover a variety of situations, from small deals (he pours over what happened with Home Products International) up to large reorganizations (gives a detailed analysis of the restructure of Kmart Corporation)
In case your time is short, and you want to focus on just one book, this is the one.
About the author: Martin Whitman is Chairman and co-CIO of Third Avenue Management LLC. He has taught courses in value investing and distressed investing for the past thirty years at the schools of management at both Syracuse University and Yale University (Source: Amazon).
Fundamentally speaking and before getting into the specific of restructuring, the basic skill necessary for one trying to move into the industry is being able to perform a deep and thorough credit analysis of highly levered companies, and that’s the very thing that A Pragmatist’s Guide to Leveraged Finance offers.
As the titles says, the book takes a more pragmatic approach to teaching credit analysis, using many practical examples, sample documents, and excel spreadsheets to illustrate the key concepts.
In case you feel like brushing up (or learning for the first time) your credit skills before plunging into the complex world of restructuring, this is the book for you.
About the author: Robert S. Kricheff is the global strategist and a principal and portfolio manager at Shenkman Capital, a $27 billion investment firm focused on credit. Prior to this he was a managing director at Credit Suisse for over twenty years, working in leveraged finance analysis on bonds, bank debt, and CDS, and ran the Leveraged Finance Sector Strategy Group (Source: Amazon).
Howard Marks is the chairman and cofounder of Oaktree Capital Management, and also one of the most well-known investors in distressed debt out there with more than four decades of industry experience
In The Most Important Thing, Marks imparts a great deal of his experience investing through the cycle and explains his views on how to generate value and avoid mistakes in the investing world.
This book is full of insights and is very useful for aspiring restructuring practitioners because, whether you plan to work on advising or investing in companies which are about to or are already going through a restructuring process, it’s important to have a good understanding of how distressed investors think about risk and the price/value relationship – note that, for better or worse, this type of investor is often a key player in a restructuring process (either providing much-needed capital or just exploiting the situation to make a quick profit!)
About the author: Howard Marks is chairman and co-founder of Oaktree Capital Management, a Los Angeles-based investment firm with $100 billion under management. He holds a bachelor’s degree in finance from the Wharton School and an MBA in accounting and marketing from the University of Chicago (Source: Amazon).
Valuation is a very important subject in corporate finance and applicable to all investment banking, including restructuring.
Given the subject is so important, we should learn from the best. This book is written by Aswath Damodaran, who is a professor of Finance at the Stern School of Business at New York University and is known as the “Dean of Valuation.”
It starts with some foundational chapters where Damodaran lays out the tools necessary to do the valuation work, and then he elaborates on valuation considerations across different company types and life cycles, including one full chapter about declining companies (their path to a restructuring)
If valuation in general or more specifically in restructuring situations is a skill gap you need to fill, this is the book you should choose.
About the author: Aswath Damodaran is a professor of finance and David Margolis teaching fellow at the Stern School of Business at New York University. He teaches the corporate finance and equity valuation courses in the MBA program. He received his MBA and PhD from the University of California at Los Angeles. His research interests lie in valuation, portfolio management, and applied corporate finance (Source: Amazon).
When preparing for a career in restructuring, books are a good starting point but should not be your only source of information. As discussed previously, restructuring involves a range of different skills, including the usual suspects in investment banking such as corporate finance and accounting, a thorough legal analysis to digest the information contained in the various agreements between the companies and its creditors (i.e., loan agreements) and shareholders (shareholder agreement), plus more soft skills, for instance stakeholder management and game theory.
Although this might seem daunting at first, there are additional resources available online that cater to all the needs required to work in restructuring. The Restructurer online course is the ultimate guide for anyone considering a career in rand requiring some more focused, practical knowledge of the tools and skills required to excel in this field.
Once you feel confident enough with your skills and start interviewing for roles in this area, it’s also important to practice interview questions as much as possible so that you can ace the technical interviews which will go a long way in terms of helping you to secure your desired position. The questions that you will face may be restructuring specific or more usual “investment-banking-like” (i.e. general corporate finance, M&A, valuation or accounting-related), so make sure to cover all these.
Given the increasing demand for restructuring roles, the interview process has become more and more competitive. Some may find the range of skills necessary a bit dauting, but thankfully this can be partly addressed by books as they can provide the theoretical foundation necessary to better understand this industry. Better yet is to supplement reading with more focused, practical knowledge so that you have the toolkit necessary to perform well from your first day. Make no mistake, the path is arduous but by leveraging the resources and information contained in this article, you’ll have an advantage over your competitors.
Some other books to consider are: