0 Turnaround/Recovery Market from a Bank’s Perspective 25 September 2007

1 TURNAROUND / RECOVERY MARKET FROM A BANK’S PERSPECTIVE Do we need insolvency practitioners?

2 WHY DO WE NEED TURNAROUND PROFESSIONALS? UK PICTURE H Corporate failures declined by 6.9% to 8930 (9592 H12006)

3 DO WE NEED TURNAROUND PROFESSIONALS? Financial Analysis Balance sheet, depreciation and determination of income, stock valuations and the determination of income, cash flow and funds flow, plans and forecasts, analysis of accounts Cost Analysis Break even analysis, lost analysis, management decisions Investment Analysis Capital expenditure evaluation, the cost of capital, analysis of project returns, risk and uncertainty

4 DO WE NEED TURNAROUND PROFESSIONALS? Why do we need turnaround professionals? Past, present, future

5 DO WE NEED TURNAROUND PROFESSIONALS? In business, a downturn is never more than a few minutes away. Major customers can leave, disappear or refuse to pay. Brands can be damaged, fairly or unfairly, by ignorance or malice. Mistakes, acts of God or simple actions and unforeseen sequences of events can all conspire to create adversity

6 POLLY PECK ENRON UNWINSMG ROVER LTCM WORLDCOM MIRROR GROUP FAIRPACK

7 WHY DO WE NEED TURNAROUND PROFESSIONALS? DOWNTURNS Economics shifts External market changes Competitive pressures Mis-management Weak leadership Lack of market awareness Poor/slow use of information Inability to innovate

8 WHY DO WE NEED TURNAROUND PROFESSIONALS? 5 KEY CAUSES OF DECLINE Adverse development in market demand or increased competition High cost structure Poor financial controls Failure of big projects Acquisitions problems

9 WHY DO WE NEED TURNAROUND PROFESSIONALS? “Fewer than 50% of mergers ever reach anywhere near the economic or strategic destination that was envisioned for them. In fact, in many cases the mergers fail because the new company manages under estimated, ignored or mishandled the integration tasks” Harvard Business Review 1997

10 WHY DO WE NEED TURNAROUND PROFESSIONALS? GREED AND CORPORATE FAILURE Poor strategic decisions Over expansion and ill judged acquisitions Dominant CEO’s Greed and desire for power Failure of internal controls Ineffective directors/owners

11 PAST, PRESENT, FUTURE WHERE WE WERE O/D’s with F&FC (debentures) TODAY Asset based lending ADVANTAGES Day to day visibility on sales and bad debts Protection against declining sales Facility linked to values of assets

12 PAST, PRESENT, FUTURE BLAMING COMPLAINING JUSTIFYING DEFENDING WITHDRAWING

13 PAST, PRESENT, FUTURE Focus on customers Control the cash Think ahead Leadership Creative Work with others

14 PAST, PRESENT, FUTURE WAY OUT OF A DOWNTURN Understand and meet the changing needs of customers Ensure a strong sales culture Instil a clear product focus that concentrates on what the firm does best Regularly review strategy

15 PAST, PRESENT, FUTURE TO THE COMPANY STAKEHOLDERS Technical expert Critical friend Supportive partner Encouraging early intervention Consensual restructuring

16 PAST, PRESENT, FUTURE MORE OF – SAVE BUSINESSES & INSOLVENCIES Independent business reviews Change management Turnaround project management Contractual issues Security reviews

17 FUTURE PROFILE OF TURNAROUND PROFESSIONALS Counsellor Partners Project management Organisational change management Specific industry knowledge Finance professional with insolvency experience