Managing cash through a parent's insolvency

Situation

An operator of shared office and co-working space was going through a restructure of its own while its overseas parent entered a court-supervised insolvency process. The local business depended on the parent for funding. That funding could no longer be assumed, and it could not be requested casually either, because every payment out of the parent was subject to the court process.

The local business had long property leases, members paying monthly and a cost base that could not fall as fast as occupancy had.

Constraint

Two clocks ran at once. The restructure needed decisions on sites, leases and headcount, and each decision changed the cash profile. Meanwhile the business had to stay solvent week by week, and directors needed to be able to say, with evidence, that it could pay its debts as they fell due.

The parent’s process added a further constraint. Any request for funding had to be justified with a clear forecast and a clear purpose, on the parent’s timetable rather than ours.

What was built

A rolling short-term cash flow forecast for the local business, with the restructure decisions modelled as separate scenarios so their cash effect could be seen before they were committed. Lease exits, negotiated rent positions, site closures and headcount changes each had a cash profile and a timing.

Alongside it, a funding case for the parent: how much was needed, when, what it protected, and what would happen without it. This was rebuilt each time the position moved.

Who it was built with

The local finance team ran the weekly update once the model was stable. Property and operations supplied lease and occupancy data and tested the assumptions about what could actually be negotiated. The result went to the local directors and to the parent’s advisers.

Outcome

The business stayed solvent throughout and avoided a formal insolvency process of its own. Funding was secured from the parent when it was needed, supported by the forecast. The restructure realised substantial annual savings, and the directors had a documented basis for their decisions at each point.

What this looks like for you

When ownership is unstable or funding is conditional, the forecast becomes the negotiating document. It has to be good enough that an outside party who does not trust you can still rely on it. See cash flow and financial modelling.