Corporate Refinancing – Focus areas and importance of Transaction Services


last updated on 16 November 2022 | reading time approx. 4 minutes

Refinancing is the process through which companies raise capital by replacing the existing financial obligations with new ones that have updated terms, i.e. loan amounts, interest rates or repayment schedules. Typically, refinancing is carried out to either obtain better financing terms from improved credit worthiness or decreases in interest rates, or raise capital for operations (e.g. working capital financing) and investments (e.g. M&A or growth projects).

However, refinancing might also be an important source of liquidity in times when earnings and cash are low due to external shocks. This option is more prominent now, as the spread of the COVID-19 pandemic and the resulting lockdowns have had a negative effect on demand for many industries (i.e. automotive, aerospace, hospitality). A drawback of refinancing in times of low earnings is that the terms and covenants of the new credit agreements are likely to be stricter as the uncertainty of future cash flows and default risk increases.

Regardless of the reasons that push a company towards refinancing, the primary goal in the refinancing process is to increase the likelihood of financing while obtaining appropriate terms. In that respect, the choice of a competent transaction advisor becomes highly important as their expertise and guidance brings added value in every step of the refinancing process.

The refinancing process

The typical corporate refinancing process goes through the following 4 stages:

  1. Evaluation: analyze internal (profitability, liquidity and investments) and external (credit rating, interest rates, shocks) environment to assess the need for capital through refinancing;
  2. Preparation: select the corporate finance and transaction advisors, collect and analyze the data to develop the credit story and business case and discuss the areas for due diligence (financial, commercial, technical, etc.);
  3. Implementation: contact potential creditors, deliver information (incl. business plan, due diligence reports) and conduct Q&A sessions with interested parties;
  4. Closing: negotiate and finalize the refinancing process.

Main focus areas

Having a clear focus during every stage supports an efficient management of the refinancing process as it not only results in lower costs (internal & external), but also increases the chances of obtaining appropriate financing conditions.

In the evaluation stage, it is important to allocate resources by effectively and continuously monitoring the external and internal environment and their effect on liquidity through a comprehensive set of KPIs. The inability to address this task can lead to a delayed response to liquidity problems, which can consequently trigger a restructuring process or even default.

Collecting financial and non-financial data is essential to have a reliable flow of information during the pre­paration stage as they are the key input factors for the analyses to develop the credit story and business case. Inconsistencies between data sources and failure to incorporate non-financial KPIs can lead to inaccurate financial figures and business plan estimates. This takes us to the next important step of the preparation stage, namely developing the story the company wants to communicate to potential financing partners. The key messages need to be supported by the financial analysis and relate to the reason for the refinancing (i.e. improved credit-worthiness, growth investments, or reduced liquidity). At this stage of the process, it is necessary to look at the figures from a creditor’s perspective and explain why they should support refinancing your company.

In the implementation stage, the main focus is to provide the interested parties all the information necessary to make an informed decision. This also involves Q&A sessions with potential financing partners to follow-up on questions they might have on the company’s financial situation.

Importance of a Transaction Advisor

The refinancing process can be lengthy and include many hurdles for the company, hence it is important to have the support of a competent transaction advisor throughout the process.

During the preparation stage, the transaction team will assist the company in increasing process efficiency and information consistency due to their expertise in organizing, combining and reconciling financial and non-financial data from multiple sources. Moreover, when developing the credit story, the transaction advisor does not only analyze and visualize the data, but adds value by providing an independent and outside-in view of the message the company wants to deliver to investors. This added-value comes in forms of conducting a sense-check of the business plan assumptions and evaluating financial topics of importance to potential financing partners such as normalized earnings, free cash flow and working capital. As a result, the transaction advisor (through a Financial Due Diligence) will support and refine the company’s refinancing case, while giving additional input to anticipate and better respond to the potential financing partners’ needs.

In the next stage, namely implement-tation, the experience of transaction advisors will provide useful insights during Q&A sessions. As transaction advisors have expertise on both sides of a transaction, they can anticipate and address the areas of importance for financing partners and facilitate the refinancing process. This is also beneficial in the next stage as it lays the foundation for the negotiations.

Lastly, the transaction team provides indirect support even after the refinancing process is completed. Com­pa­nies will benefit from using the insights gained from the transaction advisor during the previous refinancing process to know where to focus on in the future when it comes to which KPIs to evaluate, and what aspects and data are important for financing partners, as well as how to increase the efficiency and lower costs of future financing initiatives.


When conducting a refinancing process, the primary goal of the company is to increase the likelihood of financing while obtaining appropriate terms. As the road towards refinancing can be challenging, the choice of a transaction advisor can be of high importance to the outcome of the refinancing process. A competent transaction advisory team does not only prepare a Financial Due Diligence but also supports developing and refining the story by taking an outside-in approach to analyzing the company that considers the needs financing partners have to make an informed decision. 

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