XYZ LTD is restructuring its debt through securitization of assets. It proposes two options: 1) using inter-firm lending to offset money owed between clients and units, and 2) implementing fees to offset funds owed between clients and units. The document then discusses internal debt restructuring through capitalizing debt and classifying lending as working capital or asset leasing. It proposes a simple securitization model using a special purpose vehicle to sell asset-backed securities to investors. This would transfer credit risk to investors while providing XYZ LTD with funds to repay debt.

1. XYZ LTD
Debt Restructuring
Inter Firm Lending Restructuring
Milton
12/13/2011
Debt Securitization

2. December 13, 2011 [Debt Restructuring]
2 Ways
a. Lending for money owed to client
b. Fees to be offset against funds owed to clients
How to Meet the Deficit
1. Units to pay off their debts immediately
- Option not viable due to stress on cash flow the option gives to units
2. To have short receivables
- Clients that owe units pay immediately, units use clients payment to reduce deficit
o The money would be 50/50 rule on money availability
3. Prepayment
- Agreement with clients to pay deposit in advance to be offset on future services provided by
the firm.
Internal Debt Restructuring
1. Capitalization of Debt
2. Classification of Lending
- Working Capital
- Asset leasing
3. Repayment Plan
a. Coming up with a repayment plan.
Sichangi Partners Advocate 2011 Page 2

3. December 13, 2011 [Debt Restructuring]
Simple Model: Basic Structures;
1. Debt Capitalization /Securitization
HFS- Units- Investors-
Lender Borrower Recovery
Financial Guarantee
Furquipment
SP Trust
2. Arrangements for Simple Model:
Hill Financial Services - Sponsor
__________________________________________
Accounts
Receivables
Sale or
Agreement
Special Purpose Vehicle
_______________________________________________
1. Issue Credit Enhancement
Accounts 2. Sovereign Protection
Receivables 3. Introduce Interest Rates
4. Cash Flow Reallocation
Sichangi Partners Advocate 2011 Page 3

4. December 13, 2011 [Debt Restructuring]
3. Explanation of Debt Capitalization:
Borrower
Units
Loan Payment Loan Agreements
Proceeds Proceeds
Hill Finance SPV- Investor
Services Furquipment
Sale of Asset Assets Backed
Securities
Services
Team
Service Agreements
Key Decision:
Securitize the assets
Securitize the Assets
Form of transfer Form of special Form of credit Form of cash flow Form of
of asset purpose vehicle Enhancement Allocation Transformation of
Cash flows
Sichangi Partners Advocate 2011 Page 4

5. December 13, 2011 [Debt Restructuring]
The Process
Is the
company
ready?
Are the
assets
Suitable?
What pool?
What legal
Structure?
What credit
Enhancement?
Securitization Of Assets
- Securitization is the transformation of an illiquid asset into a security.
- For example, a group of consumer loans can be transformed into a publically-issued
debt security.
- A security is tradable and therefore more liquid than the underlying loan or
receivables, Securitization of assets can lower risk, add liquidity, and improve
economic efficiency.
- Sometimes, assets are worth more off the balance sheet than on it.
Types of Assets to Securitize:
a) Volume which is sufficiently large and homogenous to facilitate statistical analysis
b) A stable history of rates, defaults, delinquencies, prepayments and so forth
c) Sufficient diversification- to reduce vulnerability to economic stresses
d) Basic lender’s credit quality standards that are capable of being evaluated and approved
by accounting and finance dept and specialized independent financial guaranty
companies
e) Assets must be transferable and unencumbered
Things to Assess from Assets Provided:
a) Asset portfolio analysis
b) Legal structure of the transaction
c) Quality of the originator/servicer
d) The trustee/ Funding Entity
e) The cash flow structure
f) The counterparties
Sichangi Partners Advocate 2011 Page 5

6. December 13, 2011 [Debt Restructuring]
Option 2 Available From: Ford Motors:
Sichangi Advocate HFS
UNITS
Funds Owners-
Trust
SPV
___________________________________________________________________
Receivables
Hill – CEOs Office
Corporate Brief
Litigation
Westlands
Rongai etc.
Furquipment
_________________________________________________________________
Receivables Assets Backed Securities
(Furquipment)
Sichangi Partners Advocate 2011 Page 6