Introduction
Restructuring investment banking is a deliverable-intensive practice. While M&A coverage groups produce pitch books and process materials, restructuring teams produce a distinct set of analytical work products tailored to distressed situations. Understanding these deliverables matters for candidates preparing for restructuring interviews and for anyone wanting to know what restructuring analysts actually spend their time building.
This article maps the core workstreams and deliverables that define restructuring analyst work, explaining what each product contains, how it is used, and where it fits in the overall engagement.
The 13-Week Cash Flow Model
The 13-week cash flow (TWCF) is the foundational liquidity tool in restructuring. It is often the first deliverable built on a new engagement and remains the central operating document throughout the process.
What It Contains
The TWCF is a weekly direct-method cash flow forecast spanning roughly the next quarter. Unlike income statement projections that track accrual accounting, the TWCF tracks actual cash movements: when checks clear, when customer payments arrive, when payroll is processed.
The model typically includes three primary sections:
- Cash inflows. Customer collections based on receivables aging and historical collection patterns. Other receipts such as asset sale proceeds or intercompany transfers.
- Cash outflows. Payroll and benefits, vendor payments, rent and lease obligations, interest and principal payments, capital expenditures, and professional fees. Each category is built from actual payment schedules rather than smoothed monthly estimates.
- Net cash and liquidity summary. The weekly ending cash balance, available borrowing capacity under revolvers or DIP facilities, and total liquidity position.
- Direct Method vs Indirect Method
The TWCF uses the direct method, which tracks actual cash receipts and disbursements. This differs from the indirect method used in standard cash flow statements, which starts with net income and adjusts for non-cash items. The direct method is more granular and more accurate for near-term liquidity forecasting, which is why it dominates in restructuring.
How It Is Used
The TWCF serves multiple purposes. For the company, it provides visibility into runway and identifies when cash will run out absent intervention. For DIP lenders, it demonstrates that the company can service post-petition obligations. For the court, it supports first-day motions and ongoing monthly operating reports. For stakeholders, it provides a baseline against which actual performance is measured.
Restructuring analysts update the TWCF weekly, truing up actual results against projections and rolling the forecast forward. Variance analysis between projected and actual cash flows often surfaces operational issues that require attention.
The Recovery Waterfall
The recovery waterfall is the core valuation tool in restructuring. It answers the question that dominates every negotiation: how does value get distributed across the capital structure?
- Fulcrum Security
The most senior class of debt in a distressed company's capital structure that is impaired (not paid in full) and therefore most likely to receive equity in the reorganized company. The fulcrum sits at the value-break point where cumulative claims first exceed enterprise value. Distressed credit funds spend significant analytical effort identifying the fulcrum and accumulating positions in it, since the holders of the fulcrum typically become the new equity owners post-emergence and gain influence over the plan of reorganization.
What It Contains
The recovery waterfall takes an enterprise value estimate (typically derived from DCF, comparable analysis, or liquidation value) and allocates it across claims in priority order. The model includes:
- Claims by class. All debt instruments and other claims organized by priority: administrative expenses, DIP financing, senior secured debt, senior unsecured debt, subordinated debt, trade claims, pension obligations, and equity.
- Recovery calculation. For each class, the waterfall calculates recovery as a percentage of principal. Senior secured creditors typically recover at or near par. As value runs out, lower-priority classes receive partial recovery or nothing.
- Fulcrum identification. The model identifies the fulcrum security, the class that is partially impaired and will convert into equity in the reorganized company.
| Priority | Claim Type | Typical Recovery |
|---|---|---|
| 1 | Administrative expenses, DIP | 100% (superpriority) |
| 2 | Senior secured | 100% or near-par |
| 3 | Senior unsecured | Varies (30-80%) |
| 4 | Subordinated | Often minimal |
| 5 | Equity | Usually wiped out |
How It Is Used
The recovery waterfall drives every restructuring negotiation. Debtor-side bankers use it to demonstrate what stakeholders should expect under different scenarios. Creditor-side bankers use it to challenge debtor assumptions and advocate for better treatment. The fulcrum security identified by the waterfall typically becomes the locus of negotiation, as that class has the most to gain or lose from changes in enterprise value assumptions.
Restructuring analysts build multiple waterfall scenarios: base case, downside, upside, and liquidation. Comparing recoveries across scenarios helps stakeholders understand the range of outcomes and the risk-adjusted value of different restructuring paths.
The Debt Capacity Analysis
Post-restructuring capital structure is not arbitrary. The company needs to emerge with a debt load it can sustainably service. The debt capacity analysis determines how much leverage is appropriate.
What It Contains
The analysis starts with projected post-emergence cash flows and calculates how much debt the company can support under conservative coverage assumptions. Key components include:
EBITDA projections. Stabilized EBITDA expected after operational restructuring.
Coverage ratios. Interest coverage and fixed charge coverage measure the company's ability to service debt:
Banks typically require coverage of 2.0x or higher for sustainable capital structures.
Leverage benchmarks. Industry-standard leverage levels for comparable healthy companies. A company that emerges with leverage far above industry norms faces refinancing risk and potential re-distress.
Debt capacity calculation. Working backward from coverage requirements to calculate the maximum debt principal the company can support.
How It Is Used
The debt capacity analysis informs plan negotiations. If the analysis shows the company can only support $200 million of debt, but existing claims total $500 million, the gap represents the haircut that creditors must absorb. The analysis provides quantitative grounding for recovery negotiations.
The Capital Structure Comparison
Restructuring often involves choosing among multiple alternatives: out-of-court exchange, Chapter 11 reorganization, or sale. The capital structure comparison evaluates how each path affects stakeholders.
What It Contains
The comparison typically displays, side by side:
- Current state. The existing capital structure with claim amounts, interest rates, maturities, and covenant terms.
- Alternative A. Proposed out-of-court exchange terms: new debt issued, exchange ratios, and resulting recovery percentages.
- Alternative B. Proposed Chapter 11 plan: treatment of each class, new debt and equity issued, and recovery percentages.
- Alternative C. Sale scenario: expected proceeds, distribution by priority, and recovery percentages.
Each alternative shows total enterprise value assumed, claims satisfied, and recovery by stakeholder class.
How It Is Used
The comparison helps boards and management make informed decisions about which path to pursue. It also forms the basis for creditor negotiations: if the out-of-court offer provides worse recovery than Chapter 11, creditors may reject it. The comparison quantifies the trade-offs between speed, cost, and recovery that define restructuring strategy.
The Recovery Deck
The recovery deck is the synthesizing deliverable that restructuring bankers present to clients and stakeholders. It pulls together all the underlying analysis into a narrative presentation.
What It Contains
A typical recovery deck includes:
- Situation overview. How the company reached distress, the immediate liquidity position, and the need for restructuring.
- Capital structure analysis. The current debt stack, maturity profile, and key terms that create pressure.
- Valuation summary. Enterprise value under going-concern and liquidation scenarios, with methodology explanation.
- Recovery waterfall. The allocation of value by priority class under multiple scenarios.
- Alternative comparison. Side-by-side evaluation of restructuring paths with recovery implications.
- Recommendation. The advisor's proposed path forward with supporting rationale.
How It Is Used
The recovery deck serves as the primary communication vehicle throughout the engagement. Early versions go to the board to secure engagement approval. Updated versions go to creditor committees to present proposed terms. Final versions support disclosure statements and plan confirmation. The deck evolves as the situation develops, but its core structure remains consistent.
How the Deliverables Connect
The deliverables form an integrated analytical framework:
- The TWCF establishes liquidity and runway.
- The recovery waterfall allocates value and identifies the fulcrum.
- The debt capacity analysis determines sustainable leverage.
- The capital structure comparison evaluates alternatives.
- The recovery deck synthesizes everything for stakeholder communication.
On a live engagement, analysts move between these deliverables constantly. A change in the operating model flows through to the TWCF and then to the waterfall. A new restructuring proposal requires updated comparisons. Each piece connects to the others, which is why restructuring modeling is often described as more interconnected and iterative than standard M&A work.
Understanding these deliverables helps candidates prepare for interviews. Technical questions often ask how models work, what inputs matter, and how changes propagate through the analysis. Candidates who can explain the full deliverable map, rather than isolated components, demonstrate the integrated thinking that restructuring firms value.
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