Debt Valuation Mandate in a Financial Restructuring Context

Mandate Description

The mandate was carried out on behalf of a tourism group in the context of a debt raising and renegotiation process involving financial institutions and private investors.

The objective of the assignment was to assess the market value and implied return of existing debt instruments and to model the target structure of new debt financing.

The valuation aimed to ensure consistency between the value of convertible bonds, the group’s future debt servicing capacity and the return expectations of lenders.

Key Issues

The main challenges of the mandate were to measure the economic value of debt instruments in a context characterised by a high risk of default.

A key objective was to calibrate a market-based rate of return adapted to the financial structure of the group following the restructuring.

The assignment also required simulating various conversion and refinancing scenarios in order to anticipate their impact on the capital structure.

Approach and Results

The analysis relied on several complementary valuation tools.

• A risk-free yield curve modelling combined with sector-specific credit spreads was used to assess the cost of debt.
• The optional component of convertible bonds was valued using an adjusted Black–Scholes model.
• In addition, a secondary market liquidity analysis was conducted to estimate the current market value of the outstanding debt instruments.

The analysis made it possible to determine a fair market rate for debt renegotiation and to assess the impact of refinancing on the balance sheet structure.

This valuation constituted an essential support for discussions between financial management, creditors and institutional investors.

The mandate was aligned with the group’s overall business valuation in order to ensure methodological and financial consistency within the restructuring plan.