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From the beginning of and throughout Spectrum’s engagement, we assess our client
company’s value and its debt capacity from a variety of perspectives and under varying
assumptions. For example, Spectrum looks at the
value of its clients’ business units in the public, private
and merger markets on a current basis, and also
based on improved future operations. Spectrum also
characterizes its clients’ various businesses as
either “core” or “non-core”, with a view toward having
the non-core portions provide a funding source for the
restructuring. Wind-down and liquidation values are
often helpful to look at, if for no other reason than
demonstrating to creditors why a collaborative effort
to maximize going concern value is sensible. These
analyses also inform us and our client of the likely
parameters of the eventual restructuring.

We carefully evaluate the debt capacity of our client’s businesses to design an optimal
capital structure, which we view as an essential underpinning of any successful
restructuring. This assessment can also be used in raising new financing to fund the
business. Spectrum’s debt capacity evaluations regularly include the following analyses
and assessments:

Senior debt capacity, on secured and unsecured bases, through revolving or term
facilities, whether based on formulas, cash flows or both.

Junior debt capacity, including traditional forms of mezzanine and junior debt, but also
Tranche B debt; cash flow-related securities; springing principal notes; and other
sophisticated structures.

Available debt capacity, or dry powder, available to the company to meet contingencies.


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