‘How to manage debt in recession’

Stakeholders have prescribed ways to preserve businesses in challenging times, noting that it takes effective management to respond to an economic recession.

At a breakfast meeting organised by PricewaterhouseCoopers in Lagos, the stakeholders stated that managers must consider the effects of downturn and what it means for their businesses and its survival.

Besides, they noted that there are numerous regulatory policies laid by government agencies, which hinder the facilitation of reforms in country.

In an effort to address the challenges, former Chief Executive Officer, MTN Nigeria, Michael Ikpoki noted that there is need for organisations to change their mindset in handling businesses in hard times, adding that there have been a lot of discussions on financial restructuring., hence, businesses need to clearly state their strategies.

“Organisations need to state out clear strategies. What we see today are organisations that literally dabble in everything and overtime what happens is dissipation of energy, which does not translate to value for the organisation.

Any financial institution without a clear strategy is running at a risk.

He said one of the biggest challenges organisations are faced with is recognising when things start going back.

“There are situations of corporate denial of some of the realities that are facing the business which boils down to how well organisations understand the economy, and how well they are able to translate the economies to their respective businesses.

“Failure to do that results in weakening of businesses which sets in panic instead of a calm understanding of what the issues are.

“The issue of mindset and understanding the economy is critical to managing debt in economic recession,” he said.

Senior Manager, Advisory Deals, PwC, Ms. Clara Amarteifio-Taylor said in terms of managing debts, it is important to assess businesses early enough, noting that managing debts could be cumbersome at the point of defaulting when businesses approach lenders.

“If you engage lenders when there is still sufficient time, it looks at the cash flow, see what level of debt you can accommodate and come up with potential restructuring options for loans.

“However, if you wait at the level that you default, the regulator already comes into the picture which appears too late for individuals to do anything”, she said.

In his remarks, Associate Director, PwC Nigeria’s advisory deals practice, Seyi Akinwale said: “We are supporting our clients in trying to make them preserve their values during the challenging times. To explore ways that they can preserve values”.

On the business side, Akinwale noted that the firm is supporting organisations by giving an independent assessment of the business, helping them work alongside with their lenders to be able to achieve bankable solutions that are acceptable to the banks and that can lead to amicable restructuring strategies in line with economic realities.

He highlighted strategic interventions that can help companies preserve values to include, strategic alternatives and business planning, operational improvements, review of contractual obligations, liquidity and cash management, refinancing and recapitalisation, among others.