The preceding chapters covered components. These three cases integrate them end to end. They are composites — constructed to isolate one mechanism each, with clean numbers and no loose ends, which real deals never have. Treat them as an orientation exercise: they show you the shape of the analysis before Part VII puts you in front of five real deals where the documents are messy, the causation is contested, and you can go check every claim yourself.
Case 1: a retail Chapter 11 that becomes a liquidation
Setup. A specialty retailer with 400 leased locations, $1.8bn of revenue declining 6% annually, $95mm of adjusted EBITDA against $60mm of defensible run-rate EBITDA once sponsor fees and 'non-recurring' store closure costs are removed. Capital structure: $250mm ABL revolver secured by receivables and inventory, $600mm first lien term loan, $200mm unsecured notes. The maturity wall is eighteen months out.
Diagnosis (Chapters 1, 6–7). This is operational distress, not balance-sheet distress. Revenue decline is structural — channel shift, not a cyclical dip. The liquidity trigger arrives early: the borrowing base shrinks as inventory is marked down, trade credit insurers withdraw cover forcing cash-on-delivery terms, and the revolver is drawn defensively. Runway from the 13-week model: eleven weeks.
Valuation (Chapters 9–10). Going-concern DCF produces $700mm, but with a high probability of failure the scenario-weighted value is far lower. Liquidation analysis: inventory at 55% of cost in an orderly GOB process, receivables at 80%, leases with negative value net of rejection damages. Liquidation value of roughly $480mm against $850mm of funded debt — the fulcrum is the first lien, impaired.
Process (Chapters 12–16). Files with a DIP from the existing ABL lenders including a roll-up, and milestones requiring a going-concern sale within 45 days or a pivot to liquidation. No qualified going-concern bid emerges. The case converts to a full-chain GOB liquidation under Section 363, leases are rejected under Section 365 with damages capped by Section 502(b)(6), and the estate pursues preference actions and a fraudulent transfer claim against the sponsor arising from a dividend recapitalisation two years pre-petition.
Outcome. ABL paid in full. First lien recovers roughly 55 cents. Unsecured notes and trade creditors recover in the low single digits, plus a share of any litigation proceeds. The lesson: an operationally broken business does not become viable through restructuring, and the analyst who diagnosed this correctly at the first stage avoided the second lien entirely.
Case 2: a sponsor-led liability management transaction
Setup. A sponsor-owned industrial business, $1.1bn of first lien term loan, covenant-lite, maturity in twenty months, EBITDA down from $180mm to $115mm. The company needs $150mm of new liquidity. The refinancing market will not take the paper at a workable price.
Document analysis (Chapter 8, 18). The credit agreement contains an unrestricted subsidiary designation mechanism with a pro forma leverage condition, investment baskets totalling roughly $180mm of capacity including a builder basket grown during profitable years, and — critically — sacred rights protecting pro rata sharing only against amendments directly and adversely affecting a lender's terms. Post-Serta, no reliance is placed on any open market purchase provision.
The transaction (Chapters 19–20). An ad hoc group holding 62% of the term loan negotiates with the sponsor. The structure is an extend-and-exchange: the majority amends to permit new priming debt, participating lenders provide $150mm of new money and exchange existing holdings at 78 cents into a new first-out tranche with a maturity three years out. Non-participants retain their original instrument, now second-out.
The response (Chapter 20). Excluded lenders holding 31% had signed a cooperation agreement four months earlier, but 31% is below the one-third blocking threshold by a narrow margin. They sue on the Serta theory. The defence rests on Mitel: the amendment did not directly alter their loan terms, and the sacred rights language is drafted in the Mitel form rather than the Serta form.
The lesson. The outcome turns on drafting that predates the transaction by six years. The analyst who read the sacred rights provision before buying knew which side of this they were on; the one who relied on the transaction's economic shape did not.
Case 3: an operational turnaround that works
Setup. A $400mm-revenue business services company, EBITDA fallen from $52mm to $19mm over three years, $310mm of debt, a maintenance covenant breach two quarters away. Lenders require the appointment of a CRO as a condition of waiver.
Stabilisation (Chapters 21–22). Weeks one and two: consolidate cash visibility across 14 bank accounts, build a bottom-up 13-week forecast, institute disbursement controls. The forecast reveals a trough liquidity point in week nine, three weeks earlier than management believed. Discretionary spending is stopped and collections are escalated on $28mm of overdue receivables.
Diagnosis (Chapter 23). Contribution margin analysis by customer shows that 22% of revenue is negative at the contribution level — largely a set of contracts priced in 2019 and never repriced. Site-level analysis shows three of eleven locations losing money before allocation. The 100-day plan: reprice or exit the unprofitable book, close two sites, reduce corporate overhead by 15%, and consolidate a fragmented supplier base.
Execution. Repricing succeeds on roughly 60% of the targeted book — customers absorb increases rather than switch, because switching costs are real — and the remainder is exited. Working capital releases $22mm in the first quarter. Structural cost actions require $9mm of cash up front, funded by an amended facility the lenders extend because the forecast has held for eleven consecutive weeks.
Outcome. EBITDA recovers to $38mm within four quarters on 12% lower revenue. The covenant is met without a restructuring. The observation worth carrying: the decisive asset throughout was forecast credibility — the lenders extended the facility because the numbers had proved reliable, not because the plan was clever.