1. Failure is the opportunity to begin again, more intelligently Spark Claims No Copyright, and encourages the use of any template, document or idea found on our website in the resolution of your business issues. Informal Debt Workouts : Practical insights for creditors & debtors in managing financial distress. Werksmans – Business Rescue, Restructuring & Insolvency Practice “Noblesse oblige!”, said the plumber washing his hands to the ship’s surgeon….. *The concept that nobility/seniority extends beyond mere entitlements and rank and bestows upon those who hold such status an obligation to fulfill social responsibilities, particularly in leadership roles.

2. Failure is the opportunity to begin again, more intelligently Spark Claims No Copyright, and encourages the use of any template, document or idea found on our website in the resolution of your business issues. Slide 2 of 19 20-36 Appendixes Why are you here? Can we articulate a problem statement?

3. Failure is the opportunity to begin again, more intelligently Spark Claims No Copyright, and encourages the use of any template, document or idea found on our website in the resolution of your business issues. Slide 3 of 19 20-36 Appendixes Insolvency Indicator South Africa Sub- Saharan Africa OECD Secured Debt - Recovery rate (cents on the dollar/Rand) 35.320.072.3 Time (years)2.03.01.7 Cost (% of estate)18.023.19.0 Outcome (0 as piecemeal sale and 1 emerges as a going concern) In the case study run, what would the outcome of the rescue be? 1 = success going concern 001 Strength of insolvency framework index (0-16)14.56.312.1 Source: World Bank Doing Business.org Perhaps this is a reason? OECD: Organisation for Economic Co-operation and Development

4. Failure is the opportunity to begin again, more intelligently Spark Claims No Copyright, and encourages the use of any template, document or idea found on our website in the resolution of your business issues. Slide 4 of 19 20-36 Appendixes What will we focus on, will it be practical?

5. Failure is the opportunity to begin again, more intelligently Spark Claims No Copyright, and encourages the use of any template, document or idea found on our website in the resolution of your business issues. Slide 5 of 19 20-36 Appendixes There are common possible outcomes for all distressed firms My Focus Today

6. Failure is the opportunity to begin again, more intelligently Spark Claims No Copyright, and encourages the use of any template, document or idea found on our website in the resolution of your business issues. Slide 6 of 19 20-36 Appendixes So why are businesses failing in the first place?

7. Failure is the opportunity to begin again, more intelligently Spark Claims No Copyright, and encourages the use of any template, document or idea found on our website in the resolution of your business issues. Slide 7 of 19 20-36 Appendixes Obstacles every declining business faces – root causes 1.Problems of delegation and team-building 2.Poor Leadership (thought and organisational) 3.Lack of Structure 4.Poor data Ask why 5-10 times with every self-reported reason for failure on the prior slide, and the final root cause falls into one of 4 meta issues – regardless of business size, industry or complexity. (even lack of scale) It is important to distinguish between symptoms and cause.

8. Failure is the opportunity to begin again, more intelligently Spark Claims No Copyright, and encourages the use of any template, document or idea found on our website in the resolution of your business issues. Slide 8 of 19 20-36 Appendixes Business Failure - Obstacles every business faces – self-remedial domains Embedded in the remedial solutions to the 4 meta-issues discussed on the previous slides, are the specific skill-sets and competencies of: 1.Strategy & Planning,Strategy & Planning, 2.Cash & Value Management,Cash & Value Management, 3.People & Organizational Structure,People & Organizational Structure, 4.Reliable Execution & Enabling Habits,Reliable Execution & Enabling Habits 5.and finally Personal Development & Leadership.Personal Development & Leadership. “The man who does not read has no advantage over the man who cannot read.” - Mark Twain “The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn.” - Alvin Toffler - 46 Rules of Genius"

9. Failure is the opportunity to begin again, more intelligently Spark Claims No Copyright, and encourages the use of any template, document or idea found on our website in the resolution of your business issues. Slide 9 of 19 20-36 Appendixes How does a successful & fully scoped informal debt work out take-place?

10. Failure is the opportunity to begin again, more intelligently Spark Claims No Copyright, and encourages the use of any template, document or idea found on our website in the resolution of your business issues. Slide 10 of 19 20-36 Appendixes Sustainability: How to avoid this occurring again. Address the 4 underlying causes that led to failure. Position the business to create its own nightmare. Initial Focus: Cash, Servicing Debt, Remaining Self-funded, understanding non-linear multipliers – dealing with isometric scaling We have two tasks, fulfilling debt obligations and avoiding this crisis in the future

11. Failure is the opportunity to begin again, more intelligently Spark Claims No Copyright, and encourages the use of any template, document or idea found on our website in the resolution of your business issues. Slide 11 of 19 20-36 Appendixes Our Minimum Considerations in the debtor Workout - Rehabilitation Plan Minimum Considerations start with a)Continued Business Stabilization and Austerity Measures (LEAN) b)Tactical self-funding initiatives c)Strategic Review d)Operational Restructuring e)Company Restructuring i.Debt Restructuring ii.Debt Refinancing If results are shown, and credibility built in (a) b-e are required as they inform any extension/composition debate, and allow for alternatives to be explored (debt to equity swops) In most instances Informal Debt workouts consist primarily of: i.Debt Restructuring (same contract, different terms) ii.Debt Refinancing (new contract, instrument or creditor or both )

12. Failure is the opportunity to begin again, more intelligently Spark Claims No Copyright, and encourages the use of any template, document or idea found on our website in the resolution of your business issues. Slide 12 of 19 20-36 Appendixes The Informal Debt Workout – The aggregation problem and herding cats Debtor Operations Servicing Anxious Customers Debtor Management Secured Bank Key Supply Chain Creditors Incidental Tradex ? Insurer SARSRegulator Transact Bank Labour Unions Outsourced functions IT, Security, Call- centres Non-LEAN functions A-Z PR, Merchandizing, Flowers Regulatory/Compliance Functions (audit/tax) Shareholders Incidental Tradex ? Incidental Trade Key Supply Chain Creditors Key Supply Chain Creditors The Aggregation Problem is a form of the Prisoner's Dilemma Uncoordinated Self-serving Varying incentives & Skin in the game Different attitudes to debtor survival Where we see Bullying and Unilateral Action Resulting in outcomes 100% certainty of Economic Value being destroyed Most often each part in the whole sees value destruction from their own self serving action

13. Failure is the opportunity to begin again, more intelligently Spark Claims No Copyright, and encourages the use of any template, document or idea found on our website in the resolution of your business issues. Slide 13 of 19 20-36 Appendixes The key enablers for any successful workout allow us to prepare Most reasons cited for a firm’s debt remediation failure, distill to common underlying causes and so we can identify key enablers of a workout: 1.The Homogeneity of the debtor’s creditors (driven in part by the total # of creditors) 2.The willingness to act in good faith and to demonstrate integrity and intent. ( Debtor: Austerity & LEAN and Creditors: Don’t extort/extract additional securities or concessions) 3.Interest in the continued viability of the debtor business, in one form or another. 4.Objective, impartial, credible, non-adversarial and fair arbitration in key points of dispute/contention (la version Française! Reputable Insolvency Legal, Regulatory bodies or Central Bank/Treasury ) 5.An enabling legal framework, in so far as alternatives can be considered, their costs compared, rights benchmarked, process steps guaranteed, timelines defined etc. This final point is apparently a subtle one. Experience in other parts of the world (Asia after its debt crisis pre-2000, the London Approach from the City’s 70’s oil crisis) has shown that the formalization of something like the 2008 Company Act and the new Business Rescue framework, should have seen a rise in informal debt workouts!

14. Failure is the opportunity to begin again, more intelligently Spark Claims No Copyright, and encourages the use of any template, document or idea found on our website in the resolution of your business issues. Slide 14 of 19 20-36 Appendixes Debtor Austerity and pre-workout planning to ensure enablers are in place and obstacles removed. Creditor Collective formed and grace given to present rehabilitation plan meeting Creditor demands Presentation of: Austerity – proof of delivery Assessment of Strategic Position and Reasonable Prospect using OCC/CCC - Why deny the inevitable? Else, options and creditor benefit from Self-funding tactics Company Restructuring Operational Restructuring Debt Restructuring Debt Refinancing Deliver on Rehabilitation Plans, with formal processes still an option in the event of non- delivery using simple governance model and mandates There are 4 phases to either an informal workout or formal workout (Prepack)

15. Failure is the opportunity to begin again, more intelligently Spark Claims No Copyright, and encourages the use of any template, document or idea found on our website in the resolution of your business issues. Slide 15 of 19 20-36 Appendixes The workout landscape becomes manageable – aligned incentives! Debtor Operations Servicing Assured Customers Deliver on workout phases Debtor Exco & Management Workout PM with Project Office, which instills Turnaround discipline, stakeholder co- ordination and tracking (5 things) Consolidated Creditor Collective, from a Value vs. Volume triage SARS Regulator Workout Steerco with decision making mandate Unions Secured Lender Transactional Banker & Insurer Key Supply Chain Creditors Outsourced functions LEANed functions Shareholders - Fewer creditors now commit to a cooperative collective - Delegating decision makers on workout steerco acting as single comms channel for Creditors - PMO and PM co-ordinate and track debtor commitments, and QA deliverables - Ring Fence the debtor and allow it to focus - Settle with low value & volume creditors.- remove noise - Remove non-essentials - LEAN austerity - Expand outsourced functional mandate of non-core functions and incentivize thru consolidation

16. Failure is the opportunity to begin again, more intelligently Spark Claims No Copyright, and encourages the use of any template, document or idea found on our website in the resolution of your business issues. Slide 16 of 19 20-36 Appendixes What are the key messages we should take away or debate?

17. Failure is the opportunity to begin again, more intelligently Spark Claims No Copyright, and encourages the use of any template, document or idea found on our website in the resolution of your business issues. Slide 17 of 19 20-36 Appendixes Closeout - Key Takeaways 1/2 There is cause to question the efficacy of our insolvency in terms of comparison of key outcomes. We can learn from other economies and nations who despite poorer and less progressive frameworks still consistently manage to achieve better results. It is not the insolvency framework, but how the tools (informal processes) available to debtors and creditors are understood and used, and in particular unrealistic expectations of what a business rescue can achieve, that require some thought. A mature and enabling “rescue culture” must evolve reflecting different attitudes towards debt-forgiveness, and 2 nd chances, but in particular transparency and collaboration. Too often, perceived creditor intransigence and lack of cooperation is a direct result of debtors failing to take action, their lack of transparency, their inability to show good-faith and an inability to deliver on remedial promises. These are not insurmountable problems. Debtor education/awareness in terms of the benefits of earlier action and the cost-effective options of remedial tools, coaching & post lending support prior to a workout, as well as the fully scoped informal workout should be hugely attractive compared to the costs and risks of formal processes. Creditors have a big role to play in driving this.

18. Failure is the opportunity to begin again, more intelligently Spark Claims No Copyright, and encourages the use of any template, document or idea found on our website in the resolution of your business issues. Slide 18 of 19 20-36 Appendixes Closeout - Key Takeaways - 2/2 If debtors take action well before actual financial distress, many more options are available to them, which if applied will either negate the need for formal procedures or actually enable these to produce better outcomes. Creditors need not be passive, and can influence debtors, either by building awareness, and advising debtors on actions to consider, or by demanding workouts which are wider in scope debt restructuring and refinancing alone. Workouts that include key and focused turnaround tactics and enable self-funding waste removal and efficiency gains, with broader considerations on product/service rationalization, and operational and company restructuring take time but add considerable value. These expectations in what an informal workout should aim to achieve, and how and who participates require a spirit of collaboration and individual leadership. Creditors have many incentives to embrace this collaborative approach, as it will ensure collectively and individually far less effort on their part, in most instances a better financial result and where a decision is made to initiate formal processes, the information required to assess the appropriateness of rescue will be readily available and more accurate.

19. Failure is the opportunity to begin again, more intelligently Spark Claims No Copyright, and encourages the use of any template, document or idea found on our website in the resolution of your business issues. Slide 19 of 19 20-36 Appendixes Reference Material, Website Links & Contact Details: This presentation + appendixes is a click away – this is the link The original London Approach Document More stuff online for Debt Workouts ivan.uttley@spark-sme-services.co.zaivan.uttley@spark-sme-services.co.za or Ivan.uttley@alumni.insead.eduIvan.uttley@alumni.insead.edu

20. Failure is the opportunity to begin again, more intelligently Spark Claims No Copyright, and encourages the use of any template, document or idea found on our website in the resolution of your business issues. Slide 20 of 36 20-36 Appendixes Table of Contents – Appendixes and Supporting Documentation Appendixes & Supporting Documentation  Austerity and Debtor Stabilization Measures  Principles to embrace for Successful Informal Debt Workout  Key Areas of Scope for a Successful Debt Work out Pg 20-36 Pg 20-23 Pg 24-28 Pg 29-36

21. Failure is the opportunity to begin again, more intelligently Spark Claims No Copyright, and encourages the use of any template, document or idea found on our website in the resolution of your business issues. Slide 21 of 36 20-36 Appendixes Source: Austerity essentials - getting started guideAusterity essentials - getting started guide Appendix A – Austerity & Debtor Stabilisation Measures The distressed debtor cannot reasonable expect creditors to provide concessions without the debtor’s own goodwill implicit in the implementation of painful austerity measures to stabilize that business. Implement Austerity A management philosophy must be adopted, focused on survival, for which the guiding principles must be: 1)Allow only business activities which add value for the current customer base from whom you generate income/revenue. 2)By value for the end customer, we mean any production, service, activity or process cost, for which the client would be willing to pay, as the firm goes about creating the product/service to be consumed/used. (imagine your client in front of you reading an itemized bill! Would they be willing to pay for your CEO’s golf club membership? ) 3)The performance of all other activities and processes in the company, which do not add value for the customer and generate non-essential costs to be borne by the customer should now considered unnecessary loses and waste (in this period of austerity)

22. Failure is the opportunity to begin again, more intelligently Spark Claims No Copyright, and encourages the use of any template, document or idea found on our website in the resolution of your business issues. Slide 22 of 36 20-36 Appendixes Appendix A – Austerity & Debtor Stabilisation Measures Obvious Austerity Measures (The very minimum to demonstrate intent) Removal all management perks and entitlements (close executive canteen, redeploy drivers & PAs, claw back club-memberships, sell luxury vehicles and move to leasing, cancel entertainment allowances, cut-up ALL company credit cards, dispose of non-core assets such as sporting debentures, or entertainment commitments, call in all loans made to management or shareholders) Freeze all new hires, do not fill non-critical recent vacancies (but create key staff retention plan!) Implement performance management plans Cancel all training Insist that all leave balances will be set to zero, if leave is not taken. No more travel, unless essential (test against your austerity principles). Essential travelers to stay with family, or 2-star hotel and hire only B-class vehicles or insist on "uber" usage. Review all non-BAU activities that are consuming cash or deploying resources out of line with your austerity principles – all will have to be paused and perhaps even cancelled - Do not chase sunk costs! Restrict the use of any existing credit facilities by imposing senior management sign-off Get every cost-centre manager to resubmit a new austerity aligned budget for the next 3 months, and to the financial year-end. Source: Austerity essentials - getting started guideAusterity essentials - getting started guide

23. Failure is the opportunity to begin again, more intelligently Spark Claims No Copyright, and encourages the use of any template, document or idea found on our website in the resolution of your business issues. Slide 23 of 36 20-36 Appendixes Appendix A – Austerity & Debtor Stabilisation Measures Align the business and allocate accountability The tool you should use is the Income Statement, and break this down from the summary financial amounts to the operational drivers, if you do this properly you’ll probably ditch all your other business reporting. If you don't know how to do this refer to this tutorial Deconstructing your Income Statement This step is essential in your diagnosis and essential in assigning accountability to key parts of your businessDeconstructing your Income Statement Debtor Leadership requirements Be fair, be consistent, Be clear with your expectations and demands Do not tolerate non-compliance and lead by example Create incentive's and reward those who are creative and actively participate with new and better ideas. Be present, be in touch, be available, be involved Source: Austerity essentials - getting started guideAusterity essentials - getting started guide

24. Failure is the opportunity to begin again, more intelligently Spark Claims No Copyright, and encourages the use of any template, document or idea found on our website in the resolution of your business issues. Slide 24 of 36 20-36 Appendixes Table of Contents – Appendixes and Supporting Documentation Appendixes & Supporting Documentation  Austerity and Debtor Stabilization Measures  Principles to embrace for Successful Informal Debt Workout  Key Areas of Scope for a Successful Debt Work out Pg 20-36 Pg 20-23 Pg 24-28 Pg 29-36

25. Failure is the opportunity to begin again, more intelligently Spark Claims No Copyright, and encourages the use of any template, document or idea found on our website in the resolution of your business issues. Slide 25 of 36 20-36 Appendixes 1 st Principle: Where a debtor is found to be in financial difficulty, all relevant creditors should be prepared to cooperate as a collective and remove the need for total unanimity before a workout can proceed. A minority of unsupportive creditors should have some mechanism to bind them to the majority. 2 nd Principle: The creditor collective should give sufficient time* (limited and reasonably prescribed by a trusted arbiter) to the debtor, initially for information and data gathering (for creditors to price their risk, and to consider their composition/extension position ) and then for the development of a proposal to resolve the debtor’s financial difficulties and to fulfill their debt obligations and to remain viable as a going concern. 3 rd Principle: The debtor should only be granted the privilege of a grace period under signed-off (and if necessary tested) notification guaranteeing implementation of prescribed (yet reasonable and common sense) business stabilization and austerity measures in the debtor business. Appendix B - Informal workout Guiding Principles (1,2,3 of 9) (*) - we assume that debtors understand the value of pursuing early recourse, enabled by openness and transparency..

26. Failure is the opportunity to begin again, more intelligently Spark Claims No Copyright, and encourages the use of any template, document or idea found on our website in the resolution of your business issues. Slide 26 of 36 20-36 Appendixes 4 th Principle: The proposal will be prescribed by the creditor collective and must show consideration and sufficient analysis of: a)Austerity Measures and LEAN management philosophy b)Business Stabilization and Continuity measures. c)Balance Sheet Optimization and Clean-up d)Strategic Review (properly scoped) e)Value Chain Analysis & Operational Restructuring analysis? f)A Core function and rationalization review g)Company Restructuring h)Tactical self-funding initiatives i)Debt Restructuring j)Debt Refinancing 5 th Principle: During the grace/standstill period, all bargaining creditors of the collective agree to refrain from taking any steps to enforce their individual claims or to reduce their exposure (i.e. by breaking rank or seeking disposal of their debt to a third party, however an exception to debt disposal should be considered if it is to an existing creditor not requiring introduction of a new stakeholder to the process whose commitment is unknown and who will not need to be brought up to speed in terms of information and understanding) Appendix B - Informal workout Guiding Principles (4&5 of 9)

27. Failure is the opportunity to begin again, more intelligently Spark Claims No Copyright, and encourages the use of any template, document or idea found on our website in the resolution of your business issues. Slide 27 of 36 20-36 Appendixes 6 th Principle: The collective creditors are entitled to expect that during the grace/standstill period their position relative to other creditors will not be prejudiced, especially by any actions of the debtor. 7 th Principle: Decisions about the debtor's longer-term future are only made on the basis of reliable information and reasonable assessment of key risks, by a competent and objective steering committee, chaired by the arbiter. 8 th Principle: As a tool for transparency, and to expedite decision making, the creditor collective should delegate decision making to a sufficiently skilled steering committee that: Can balance the different demands of the Creditors Ensure that WACC considerations, be properly quantified. (*) Assess the viability of the proposed rehabilitation/remedial steps Identify, Assess, and Price risk, especially ito non-delivery Communicate clearly and unambiguously Devote sufficient time to key oversight, and decision making tasks Appendix B - Informal workout Guiding Principles (6,7,8 of 9)

28. Failure is the opportunity to begin again, more intelligently Spark Claims No Copyright, and encourages the use of any template, document or idea found on our website in the resolution of your business issues. Slide 28 of 36 20-36 Appendixes 9 th Principle: The workout process should be managed by a sufficiently qualified Programme or Project manager supported as required, so that: The agreed timelines are met Actions, deliverables, and outcomes are properly documented Delivery accountability is tracked and progress reported on The agreed process steps are followed using the agreed templates Risk is mitigated and creditor concerns managed Where sensitive debtor data and information is made available to the creditors, it is safely managed as reasonably expected of confidential information. Appendix B - Informal workout Guiding Principles (9 of 9)

29. Failure is the opportunity to begin again, more intelligently Spark Claims No Copyright, and encourages the use of any template, document or idea found on our website in the resolution of your business issues. Slide 29 of 36 20-36 Appendixes Table of Contents – Appendixes and Supporting Documentation Appendixes & Supporting Documentation  Austerity and Debtor Stabilization Measures  Principles to embrace for Successful Informal Debt Workout  Key Areas of Scope for a Successful Debt Work out Pg 20-36 Pg 20-23 Pg 24-28 Pg 29-36

30. Failure is the opportunity to begin again, more intelligently Spark Claims No Copyright, and encourages the use of any template, document or idea found on our website in the resolution of your business issues. Slide 30 of 36 20-36 Appendixes Appendix C - Debtor Rehab activities – Stabilisation & Austerity Stabilization & Austerity This should be implemented before the creditor collective grant any kind of grace – do not budge on this, big changes require lots of little changes, but most importantly visible and tangible successes, no matter how small but which are quick to materialise. Old habits die hard, and people do not like to give up comforts and those privileges attached to position Allow only business activities which add value for the current customer base from whom you generate income/revenue. The performance of all other activities and processes in the company, which do not add value for the customer and generate non-essential costs to be borne by the customer should now considered unnecessary loses and waste (in this period of austerity) If the measures have been implemented, and insufficient benefit is being realised then more extreme options are available – (share my Altran French experience)

31. Failure is the opportunity to begin again, more intelligently Spark Claims No Copyright, and encourages the use of any template, document or idea found on our website in the resolution of your business issues. Slide 31 of 36 20-36 Appendixes Appendix C - Debtor Rehab activities – Strategic Review Strategic Review This is needed to provide answers to questions on medium term viability. Certainly Trade and Supply Chain creditors will want to know (and have an opinion) on the viability of a business partner from whom they derive profits. Some businesses operate in markets that are distorted, and some which are true commodities, this is a vital consideration in assessing the avenue of appealing to government or assessing real world pricing. Creditors providing concessions to a debtor owe some rationale to why they are investing time in the process and must be able to provide the rationale on their decisions. In terms of developing a value proposition to third parties willing to buy debt or convert debt to equity, this is an important piece of work that does not take too much time. Lastly, on assessing the competence of the debtor’s management or leadership (which is always a conversation that transpires at some stage or another), this artifact will be a good input. An engaged leadership team should be able to produce a coherent, and convincing view quickly. Meaningful Strategy – plain and simpleEverything needed to deliver a Strategy

32. Failure is the opportunity to begin again, more intelligently Spark Claims No Copyright, and encourages the use of any template, document or idea found on our website in the resolution of your business issues. Slide 32 of 36 20-36 Appendixes Appendix C - Debtor Rehab activities – Strategic Review Operational Restructuring Firstly, this is needed to assess leakage for the work already started in the austerity programme, so the value chain is a key starting point, each part of the value chain should have documented, the executive accountable, and the functional areas within the value chain, with head-count and budget. You will use this simple view to assess key management accounting benchmarks, such as the ratio of client facing or revenue generating staff to, middle office support and back office functions. Consideration must be made as to what a core function is so that thinking can start on the disposal of assets and use of outsourcing of the function to those who specialize in it (a call centre is a classic example, and if FS businesses can outsource sales – which is what a broker is, then why can’t other functions be outsourced, get done better and for less cost, with greater control) Each step of the value chain should also list the business processes involved and the hand-over points to other parts of the business. This will be critical in some of the self-funded tactics we will introduce to you (which without exception have always added disproportional benefit for the effort involved) Answers to product range fit, distribution channels, footprint, potential for asset disposal, org structure and outsourcing must be answered here.

33. Failure is the opportunity to begin again, more intelligently Spark Claims No Copyright, and encourages the use of any template, document or idea found on our website in the resolution of your business issues. Slide 33 of 36 20-36 Appendixes Appendix C - Debtor Rehab activities – Strategic Review Company Restructuring This consideration will emerge as the previous sections develop. A company restructuring should be kept in mind, if any of the following is true: The business itself is intrinsically sound with valuable assets and sound value proposition but incompetently led. The business has not achieved the scale required to compete and should form part of another entity by being acquired. The core products are not relevant as the original market needs and demands have changed, distribution channels (bricks and mortar) are better served through another model (strategic partnerships or via self-service, for example) Parts of the value chain which are non-core, and can be better managed by those whose core business it is (call centre, IT, marketing, sales)

34. Failure is the opportunity to begin again, more intelligently Spark Claims No Copyright, and encourages the use of any template, document or idea found on our website in the resolution of your business issues. Slide 34 of 36 20-36 Appendixes Appendix C - Debtor Rehab activities – Self-funding activities Self-funding Remedial Activities This is essential, as no creditor wishes to expose themselves to more risk Remedial plans often have a focus on revenue generation primarily, or pet projects. The removal of waste or inefficiency is often seen as a tacit admission of poor management and parts of the business where waste or inefficiency is hidden, yet known, are loath to admit the failing. Yet 100% of cost or waste removal flows through to the bottom line, whilst with revenue plans, far less impact is felt on the business (businesses with marginal costs of additional production rarely are in financial distress) Importantly, creditors require certainty, and dealing with waste and inefficiency deals with actual costs, whilst revenue plans are always projections and less certain. Certainty combined with remaining self-funding makes dealing with creditors far easier.

35. Failure is the opportunity to begin again, more intelligently Spark Claims No Copyright, and encourages the use of any template, document or idea found on our website in the resolution of your business issues. Slide 35 of 36 20-36 Appendixes Appendix C - Debtor Rehab activities – Strategic Review Debt Restructuring No change in contract or underlying instrument This concerns the underlying terms of the current debt instrument, with a range of options between preferred combinations of extension and composition. This should be assessed against the potential benefits of their business rehabilitation plan and its timeline. Debtors overlook the impact of a creditor’s WACC and how this will impact the NPV, so a credible 3 rd party needs to review this. This should be handed over to the Creditor collective’s steering committee for finalization as soon as possible In so far as the debtors own role as a creditor is concerned, they should consider the option of factoring or debtor finance which is an independent service run within any of the commercial banks. They are all similar versions of each other, and can be of benefit when managing the AR line on the balance sheet and for accessing working capital quickly (at a cost of course!), which will be a consideration for the debtor.

36. Failure is the opportunity to begin again, more intelligently Spark Claims No Copyright, and encourages the use of any template, document or idea found on our website in the resolution of your business issues. Slide 36 of 36 20-36 Appendixes Appendix C - Debtor Rehab activities – Strategic Review Debt Refinancing New contracting where the underlying instrument is changed (or creditor) If the debtor is willing to convert debt to equity, then the information needed to do this must be provided. They will attach a value to their equity, which is normally over-valued or done with assumptions that need to be stated in such a manner as creditors can assess them. The valuation will also change based on the point in time in which it is done. T=0 and T+ 3months and T+12 months will have different valuations and a discounted cash flow should be used. Industry multiples should be treated with the contempt they deserve. Although a creditor’s prerogative, the debtor would be wise to investigate alternative creditors, with different risk appetites and investment time horizons who might be considered as potential new creditors. Much more can be done to access a lot of money seeking viable opportunities. Creditors, especially banks, should consider new or updated loan instruments that can replace the existing loan, especially if they have had change in their own costs of capital, where margins on the loan have improved, and new arbitrage opportunities are identified by 3 rd parties