From EBITDA to Cash Flow: Understanding the Importance of a 13-Week Cash Flow Model in Corporate Restructuring

When it comes to corporate restructuring and bankruptcy proceedings, one crucial tool plays a vital role in determining the outcome - the 13-week cash flow model. This comprehensive financial forecasting tool provides stakeholders with a clear understanding of a company's immediate cash flow needs, helping distressed firms evaluate various operational, financial, and strategic remedies.

A screenshot of a typical 13-week cash flow model, such as AHP's, demonstrates this summary in action. The bottom section usually contains a summarized cash forecast that identifies any additional revolver or DIP financing required to maintain a desired minimum cash balance. This output is the star of the show, offering stakeholders with a vested interest in the restructuring process transparency and trust.

The structure of a standard 13-week cash flow model (TWCF) typically consists of several common elements, each designed to provide a granular understanding of a company's immediate financial needs. These components include:

* Cash receipts and disbursements over a 13-week period

* Historical data for one week

* A detailed forecast of cash inflows and outflows

The TWCF is unique to each company, yet its common elements enable restructuring professionals to provide guidance on behalf of their clients. By identifying the immediate cash flow needs at the most granular level, this model helps distressed firms evaluate the impact of various possible remedies.

In particular, a credible 13-week cash flow model can quite literally determine the outcome of an in-Court bankruptcy proceeding - whether it's securing debtor-in-possession (DIP) financing or seeking a buyer or strategic investor through M&A. In some cases, this forecast may even influence the decision to file for bankruptcy (Chapter 11 or Chapter 7) or forced liquidation.

In corporate restructuring and bankruptcies, the 13-week cash flow model is a critical tool in understanding the circumstances that underpin the decision-making process. By providing stakeholders with a clear picture of a company's immediate financial needs, this model helps distressed firms navigate their options and make informed decisions about their future.

From ebitda to cash flow