Answers / Restructuring
Restructuring Interview Questions
13-week cash flow, covenants, insolvency law, and turnaround strategy — distressed-side interviews.
66 questions · model answers · common mistakes
Cash Flow & Forecasting
- Walk me through a 13-week cash flow forecast.
- How do you build a credible integrated business plan for a restructuring?
- Walk me through the three financial statements and how they connect.
- A company comes to you with 3 months of cash left. What do you do first?
- What are the key differences between a liquidation analysis and a going-concern analysis in restructuring, and when would you use each?
- What is the primary purpose of a 13-week cash flow forecast in a restructuring, and how does it differ from a standard annual budget?
- What is an Independent Business Review (IBR), and what are lenders really looking for in one?
- What is minimum operating cash, and why is identifying it the first analytical step in a liquidity crisis?
- How do you build short-term cash forecasting credibility with lenders through a variance (actual-vs-forecast) review process?
- What early-warning indicators and liquidity headroom triggers would you set in a turnaround monitoring framework?
Legal Frameworks & Procedures
- Explain IDW S6 and its core components.
- Explain StaRUG and when you would recommend it over InsO.
- How does the absolute priority rule work in German insolvency?
- A company is considering an out-of-court restructuring. What are the key legal and practical requirements for a successful out-of-court process, and when would it fail?
- Explain the concept of 'priming' in DIP financing. Under what conditions can a court approve DIP financing that primes existing liens?
- What is the absolute priority rule (APR) in insolvency, and how does it affect the distribution of value in a restructuring plan?
- A company has a covenant breach on its senior secured loan. What are the immediate options for the company, and how would you advise management?
- What is Insolvenzanfechtung (avoidance/clawback), and why does it constrain what a distressed company can pay creditors before filing?
- How are occupational pension obligations treated in a German insolvency, and what is the role of the PSVaG?
- When does a company's duty shift from shareholders toward creditors, and why does that 'zone of insolvency' matter for directors?
- What coordination challenges arise in a group (Konzern) insolvency, and how are they addressed?
- What is an automatic stay / moratorium in insolvency, and why is it so important to a restructuring?
- Compare US Chapter 11 with German Eigenverwaltung/StaRUG as restructuring tools.
Capital Structure & Valuation
- How do you assess whether a company is over-indebted (ueberschuldet)?
- Explain a debt-to-equity swap and its implications.
- Explain the concept of 'new money' and super-seniority in a restructuring.
- Walk me through a waterfall analysis. A company has €200M EV, €120M senior secured, €80M unsecured, €50M mezzanine. Where does value break?
- How does a liquidation analysis work and why is it important in restructuring?
- A client has €80M EBITDA and €400M net debt. Senior secured €250M, unsecured €150M. How would you analyze the capital structure in a restructuring scenario?
- Explain structural subordination and why it matters.
- A company has €100M in senior secured debt, €50M in unsecured bonds, and €30M in trade payables. The enterprise value is estimated at €80M. If the company files for insolvency, what is the recovery for each class, assuming strict priority?
- A company is considering a debt-for-equity swap. The existing equity is held by management (20%) and a PE sponsor (80%). The company has €200M debt and is worth €100M. If the debt is converted entirely to equity, what is the dilution to existing shareholders, and how would you structure the swap to align incentives?
- How do you determine the fulcrum security in a distressed capital structure, and why is it critical for restructuring negotiations?
- What is an intercreditor agreement and how do payment-blockage and standstill provisions affect junior creditors in a workout?
- When is an amend-and-extend the right tool versus a full refinancing, and how is the amendment typically priced?
- How do you build a liquidation analysis, and why does forced-sale versus orderly wind-down change recoveries by asset class?
- Why do out-of-the-money junior creditors still have negotiating leverage (option value) in a restructuring?
- How does new super-senior money get injected out-of-court, and why will existing lenders consent to being subordinated?
- What is a distressed (coercive) debt exchange, and how does it work?
- Why do lenders demand upstream and cross-stream guarantees, and how do they address structural subordination?
Stakeholder Management & Ethics
- How would you approach restructuring a company where the works council is hostile?
- How do you present bad news to a client's board of directors?
- How do you run an effective creditors' committee process in a multi-creditor restructuring?
- How do you deal with the ethical complexity of restructuring?
- What is the role of a Chief Restructuring Officer (CRO), and what governance and independence tensions does the appointment create?
- How do you manage competing stakeholder interests?
- How do you sequence and message stakeholder communications when a restructuring is announced?
- How do you negotiate with a blocking or hostile creditor while keeping a consensual restructuring alive?
- How do you build trust with distressed management?
- How would you retain key management and employees through a restructuring, and what are KEIP/KERP plans?
- How do you maintain supplier and customer confidence during a public restructuring to preserve going-concern value?
- A company has a covenant breach on its senior secured loan. What options does the company have, and how would you advise management?
- How do you manage the conflicting interests of different stakeholder groups (e.g., equity holders, senior lenders, trade creditors) when advising a distressed company that needs a consensual restructuring?
- How do you approach a German restructuring where employee co-determination and the works council (Betriebsrat) significantly affect the plan?
- How do you manage critical trade creditors and suppliers in a distressed situation without breaching even-handed treatment?
- Why do you always need a credible 'Plan B', and how does the threat of insolvency strengthen a consensual restructuring?
- How do you manage information flow and confidentiality among multiple creditor groups in a restructuring without losing trust or breaching rules?
- How do you sequence an operational turnaround against a financial restructuring, and why does order matter?
Distressed M&A & Transactions
- How would you structure a sale-and-leaseback for emergency liquidity?
- Explain how a debtor-in-possession (DIP) financing can prime existing liens. Under what conditions would a court approve such priming?
- What is a dual-track process in a distressed situation, and why would advisers run a financial restructuring and an M&A sale in parallel?
- What is a credit bid, and when can a secured lender use it to acquire the business in a distressed sale?
- What is an uptier (non-pro-rata 'liability management') transaction, and why is it called creditor-on-creditor violence?
- What is a roll-up in DIP financing, and why is it controversial?
- What is an übertragende Sanierung (transferring restructuring) in German insolvency, and what are its advantages and risks?
- What is a loan-to-own strategy, and how does a distressed investor execute it?
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