Restructuring Liabilities to Unlock Hidden Value
- NP Capital Advisors Team
- Oct 8
- 6 min read
Newsletter article summary: Restructuring liabilities such as debt, vendor payables, and even leases can be just as powerful as raising capital in driving shareholder value. When equity value is low or negative (i.e., when debt exceeds enterprise value), founders lose incentive to maximize outcomes, making restructuring a critical tool to realign interests. Mechanisms such as debt-for-equity swaps, convertible notes, and vendor liability renegotiations can improve balance sheets, augment cash flow dynamics, and directly increase equity value.
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Restructuring Liabilities to Unlock Hidden Value
At NP Capital Advisors, we often meet founders and management teams who intuitively understand the importance of raising capital and scaling revenue, but overlook a quieter, equally powerful lever of value creation: restructuring liabilities.
Think of a business as a house. The enterprise value is the market value of that house. If your home is worth $3 million and you have a $1 million mortgage, your equity is $2 million. On the other hand, if your home is worth $3 million but your mortgage is worth $4 million, then your equity is negative. The value of the home hasn’t changed – it’s fixed in the market. But the size of your debt directly determines how much equity you actually hold.
This framing is critical. Many founders focus on growing the top line or raising capital without appreciating that liabilities management directly impacts equity value and cash flow dynamics.
Why Restructuring Can Be a Powerful Tool
Finance often seems mechanical, but outcomes hinge on human behavior. A founder who knows they will walk away empty-handed is unmotivated to spend time negotiating a sale or driving operational improvements that only benefit lenders.
Liability holders understand this dynamic. In practice, they often agree to restructurings precisely because they know that leaving founders with nothing creates perverse incentives. By ensuring equity holders retain some upside, everyone is motivated to push toward the best possible outcome.
Tools for Restructuring
There are several approaches companies can use:
Debt-for-Equity Swaps: Creditors exchange some of what they are owed for equity, lowering liabilities while giving lenders upside as the company recovers.
Convertible Notes: These instruments start as debt but convert into equity under defined conditions. Adjusting terms – balance, interest rate, or conversion – shifts liabilities into growth alignment.
Discounted Payoffs: When cash is available, settling debt for less than the full amount owed can give creditors certainty and companies breathing room.
Renegotiating Senior and Junior Debt: Just as homeowners refinance mortgages, companies can adjust maturities, interest rates, or principal obligations to improve flexibility.
Vendor and Trade Liabilities: Vendors or landlords often agree to lower past-due balances and revised payment schedules if they increase the chance of continued partnership.
When to Consider Restructuring
Companies should explore liability restructuring when:
Equity value becomes low or negative (when debt is encroaching on enterprise value).
Cash flow cannot support obligations (short-term insolvency risk).
A sale of the business would deliver little or no return to equity holders.
A capital raise has become challenging because too much of the raise will go to past-due liabilities.
Timing is key. The earlier that management acts, the more options are available. Waiting until creditors force the issue usually narrows the range of outcomes.
Final Thoughts
Every dollar of debt reduced is a dollar of equity regained. For founders under pressure, that truth is both sobering and empowering.
At NP Capital Advisors, we approach these situations with a founder-first mindset, helping companies preserve equity value and position themselves for long-term success, even in moments of financial stress.
Deal Highlights
NP Capital is advising a dynamic, omnichannel retail brand on a strategic sale process. The sale aligns with the brand’s mission to deliver bold, unique products through a seamless blend of online and offline channels. The new partnership positions the brand to dominate the retail market with a loyal customer base and primes it for explosive global growth.
Team Member Feature
Justin Roberts
Director
"The Builder"
Justin has excelled in the CPG space for over a decade and has held multiple executive sales positions. He has played critical roles in helping grow businesses to nine-figures, as well as assisting in taking start-up brands to market, both in food and beverage. His experience spans key accounts and distributors including Kroger, Albertson’s, Whole Foods, Wegman’s, HEB, Publix, Ahold, Costco, Sprouts, Whole Foods, GNC, Vitamin Shoppe, All Military Branches, 7-Eleven, Circle K, UNFI, KeHE, Vistar, McLane, Europa, Muscle Foods, Eurpac, and DSD.
Justin’s strengths are in building brands, developing go-to-market plans, opening new sales channels, organizational design, establishing and maintaining partnerships, and building sell-through strategies.
Industry News
Ferrero Completes Acquisition of WK Kellogg Co
The Ferrero Group (“Ferrero" or the “Company”) announced the successful completion of its acquisition of WK Kellogg Co. WK Kellogg Co is now a wholly owned subsidiary of Ferrero.
The acquisition of WK Kellogg Co supports Ferrero’s plan for strategic growth in North America and expands the Company’s reach across more consumption occasions with brands beloved by consumers.
Ferrero plans to invest in and grow WK Kellogg Co’s iconic portfolio of brands across the United States, Canada, and the Caribbean.
Heineken Buys Central American Assets in $3.2 Billion Deal
Heineken is acquiring beverage and retail businesses from Florida Ice and Farm Company for $3.2 billion.
This acquisition aims to strengthen Heineken’s market position across attractive Central American growth markets.
The deal includes Costa Rica’s Imperial beer, a major soft-drink business, and other regional beverage assets.
Jaguar Land Rover Seeks £2 Billion Lifeline to Tide Over Cyberattack
Jaguar Land Rover is raising a £2 billion loan from global banks to ease the financial strain of a cyberattack that forced it to halt production.
The loan will be priced at about 110 basis points over the secured overnight funding rate, and Citigroup Inc., Mitsubishi UFJ Financial Group and Standard Chartered Bank Plc have agreed to offer the 18-month credit facility.
The funding requirement comes as JLR grapples with the fallout from the cyberattack, which has crippled operations and sparked chaos across the UK's auto supply chain, with plants in several countries out of action since the start of the month.
Vietnam’s Masan Consumer Mulls Up to $1 Billion Stake Sale Ahead of IPO
Masan Consumer, a Vietnamese food and beverage company, plans to sell a minority stake for up to $1 billion.
The company aims to secure a pre-IPO investor, taking a 15% to 20% stake, before its Vietnam listing in the second quarter of next year.
Masan’s IPO was delayed due to global market volatility after tariffs; a recent trade deal has improved investor sentiment.
Valentino in Talks With Banks as Luxury Drop Prompts Debt Breach
Valentino SpA is in talks with creditors after breaching the terms of its debt due to a slowdown in demand for luxury goods.
The company's debt-to-earnings ratio surpassed the threshold set in its credit agreement, prompting it to seek relief on its covenants.
Valentino has been hurt by a global luxury downturn, fueled by economic uncertainty and rising tariffs, leading to a significant deterioration in earnings during the first half of 2025.
Estée Lauder Supplier Intercos Targets $200 Million US Expansion
The Italian company, a supplier to brands including Estée Lauder Cos. and Dolce & Gabbana, is targeting revenue in the $100 million to $200 million range, its chief executive officer, Renato Semerari, said in an interview. He has identified one buyout candidate and said others are on his radar, though he declined to offer details.
“We are proactively trying to buy a company in the skin and hair care sector in the US,” Semerari said. “There is a gap in our industrial footprint in that segment.
The contract manufacturer has two makeup plants in the US, but it lacks the capacity in hair or skin care to win over the largest brands or emerging trendsetters, the CEO said. In the Western world, he noted, those tend to come “mostly from the States.”
About NP Capital Advisors
NP Capital Advisors is a next-generation investment bank and consulting firm founded by a team of experienced entrepreneurs, bankers, and attorneys who have built, operated, and sold successful businesses. The firm offers tailored solutions across M&A, restructuring and turnarounds, and strategy and growth consulting in a variety of sectors. With a performance-driven fee structure and a track record of delivering exceptional results, NP Capital Advisors is dedicated to helping founder-led and emerging growth businesses maximize value and overcome challenges.
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