Restructuring and Turnaround Advisory

Restructuring and Turaround Advisory Interview Guide

Restructuring and Turnaround Advisory (RTA), sometimes referred to as Financial Distress Advisory or Corporate Recovery Services, is an accounting and finance-related service offering performed when a company is experiencing, or is at risk of, financial distress. The RTA team is engaged primarily by corporate clients (CFOs and boards of distressed companies), lenders and credit committees (agent banks, secured and unsecured creditors), official committees of unsecured creditors in Chapter 11 cases, private equity sponsors, and DIP lenders to support the company, its creditors, or both through the recovery process. Services provided include liquidity analysis and 13-week cash flow modeling, credit facility and default analysis, out-of-court workout and restructuring advisory, Chapter 11 process support, going concern assessment, financial reporting support in a distress context, and strategic alternatives analysis, among others depending on the engagement or project. When interviewing for an RTA role, it is critical to understand what financial distress looks like from the inside, the mechanics of the credit agreements that govern the company's capital structure, and the strategic options available when a company can no longer service its debt.

When performing restructuring and turnaround advisory work, there are three critical analyses that everyone is required to understand: Liquidity Analysis and the 13-Week Cash Flow, Credit Facility and Default Analysis, and Going Concern Assessment with Strategic Alternatives. All three analyses are compiled and put together in an Excel-based liquidity model and advisory memorandum and provided to multiple parties as part of the engagement: the client's board and management, the client's auditors, the agent bank and lending syndicate, the official committee of unsecured creditors, and in certain cases the bankruptcy court. This is then compiled into a final liquidity report, workout proposal, or restructuring support agreement (RSA) model for the client, the lender group, or the court.

Liquidity Analysis & the 13-Week Cash Flow

Liquidity analysis is the first and most critical analysis performed as part of any restructuring and turnaround engagement. Before a team can advise on strategic alternatives, negotiate a workout, or support a Chapter 11 case, it must answer a single question with precision: how long can the company survive on its current cash, and when exactly does it run out? The 13-Week Cash Flow (13WCF) is the standard tool for answering that question. It is a weekly, forward-looking model of all cash inflows and outflows over the next 13 weeks, built from the company's operating data, credit agreement terms, and management's near-term plans. Investment bankers, lender groups, and the client's board all build their decisions around the 13WCF. The purpose of a detailed liquidity analysis is to identify the cash runway, the timing and amount of any funding gap, and the specific week in which the company will be unable to meet its obligations if no intervention occurs. The primary goal is to present a true, granular view of the company's cash position and to quantify the urgency of the situation so that the client, the lenders, and the court (if applicable) are all working from the same numbers.

To walk through a basic example, assume a target company has the following 13-week liquidity profile:

The breach of the leverage covenant is an Event of Default under the credit agreement. Under the cross-default provision, the default under the Term Loan B is cross-defaulted to the Revolving Credit Facility, meaning the $25M revolver is also in default. Under the cross-acceleration provision, the agent bank has the right to accelerate both facilities, converting the company's $75M of credit facilities into an immediately due and payable obligation. The company typically has a 30-day cure period (or a grace period specific to the covenant) to cure the breach by paying down debt, increasing EBITDA, or negotiating a waiver with the lender group. If the company cannot cure, the lender group's options include enforcing a workout, negotiating an amendment, or filing for bankruptcy. The RTA team's role is to map this chain, quantify the exposure, and advise the client on the timing and sequencing of each option. In summary, the credit facility and default analysis is not a legal exercise — it is a financial and strategic analysis that determines the company's leverage, the lender group's leverage, and the window of time in which a consensual solution is still possible.

Going Concern Assessment & Strategic Alternatives

Under ASC 205-40 (or IAS 1 in an international context), management and the auditors must assess whether there are conditions and events that, when considered in the aggregate, raise substantial doubt about the entity's ability to continue as a going concern for a period of one year after the date the financial statements are issued. This is not a discretionary or optional analysis — it is a required assessment for every company, every reporting period, and it is one of the most consequential judgments in financial reporting for a distressed company. A going concern qualification in the audit opinion can trigger default provisions in credit agreements, accelerate debt, and eliminate the company's ability to access the capital markets, making the going concern assessment not just an accounting exercise but a strategic and financial event.

The assessment requires the team to identify and weigh conditions and events that, individually or in the aggregate, raise substantial doubt. These include:

• Negative trends in cash flows from operations, working capital, or liquidity
• Loan covenant defaults or the inability to obtain waivers
• Adverse key indicators such as a pattern of losses, negative equity, or the need to refinance debt on unfavorable terms
• Other indications such as the loss of a key customer, a significant litigation loss, or a regulatory action

To demonstrate the assessment, assume the following:

The analysis proceeds in two steps:

Step 1 — Identify Substantial Doubt. The negative operating cash flows, negative working capital, covenant breach, and cross-default, considered in the aggregate, raise substantial doubt about the company's ability to continue as a going concern for one year from the financial statement issuance date.

Step 2 — Evaluate Management's Plans. Management's plan — the $10M asset sale and headcount reduction — must be assessed for feasibility. The asset sale has not been closed, there is no signed purchase agreement, and the buyer has not committed to funding. The headcount reduction has not been communicated to employees and has not been executed. Under ASC 205-40, management's plans only mitigate substantial doubt if they are probable of being implemented and probable of effectively mitigating the conditions. In this case, neither criterion is met. Substantial doubt is not alleviated.

The financial statement implication is a going concern explanatory paragraph in the audit report, and in many cases the credit agreement will contain a provision that a going concern qualification constitutes an Event of Default, which would accelerate the debt and force the company into an involuntary or voluntary bankruptcy filing. In summary, the going concern assessment is the accounting overlay on the financial distress, and it is the analysis that connects the liquidity model, the credit agreement, and the strategic alternatives into a single, defensible conclusion about whether the company can survive. The RTA team must be prepared to support management's assessment, challenge it where warranted, and explain the cascading consequences of a going concern qualification to the board, the auditors, and the lender group.

TAS Foundations — Restructuring & Turnaround Interview Package

We have developed and compiled a comprehensive interview guide including example case studies from restructuring and turnaround interviews at the largest accounting firms across the United States and Canada to support RTA candidates through the interview process. Our package includes:

• Full-length, detailed training package for 13-Week Cash Flow modeling, Credit Agreement & Default Analysis, Going Concern Assessment (ASC 205-40 / IAS 1), and Chapter 11 process fundamentals.
• Example 13WCF Model (Excel) — weekly build with funding gap analysis, bridge facility timing, and sensitivity scenarios.
• Example Credit Agreement Walkthrough — annotated covenant package, default chain, and cross-acceleration mechanics.
• Example Going Concern Memorandum — condition identification, management plan assessment, and audit opinion implications.
• Complete set of potential interview questions with model answers, common follow-ups, and case study prompts.

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