Debt Restructuring Simulation

Teach the real trade-offs in debt restructuring

Students enter an out-of-court restructuring of a financially distressed company. Representing different stakeholders, they analyse the capital structure and negotiate a recovery.

2 - 3-hour team-based simulation
Negotiation and deal finalisation
In-class, online or hybrid delivery

Apply claim priority to a distressed capital structure

Students apply financial distress, priority of claims and recovery analysis to Big Truckers, a company with €500 million of debt and equity claims and €260 million of enterprise value. Representing Lien 1, Lien 2 or Equity, they set haircuts, calculate recoveries and work towards an out-of-court restructuring agreement.

Priority of claims

Apply the ranking of senior debt, subordinated debt and equity.

Haircuts and recovery values

Calculate how proposed losses affect each stakeholder’s recovery.

Comparable stakeholder outcomes

Compare teams that began with the same claim and objective.

At a glance

Duration

2 to 3 hours

Run the timed activity in one session or divide it across shorter teaching sessions.

Format

Multiplayer negotiation

Students analyse one distressed company from three competing stakeholder positions.

Level

UG, PG and MBA

Suitable for restructuring, corporate finance, banking, managerial finance or negotiation courses.

Professor tools

Admin dashboard included

Manage participants, control the timeline, monitor decisions and communicate with the class.

Prerequisites

Debt and equity fundamentals

Students should ideally have a basic understanding of debt and equity.

Delivery

Classroom, online or hybrid

The web-based simulation also supports multi-session and homework delivery.

Optional assessment

Optional team-level evidence

Use recovery, agreement and comparison data to support feedback or assessment.

Course fit

Corporate restructuring and finance

Suitable for Corporate Restructuring, Corporate Finance, Banking and Finance, Managerial Finance and related modules.

From value gap to restructuring agreement

Connects the value gap, competing recovery objectives and the four-step restructuring process from assessment to agreement.

Diagram showing value gap in a debt restructuring agreement

Debt Restructuring simulation gameflow and stages

1. Intro | 10 minutes:

Students begin with an introductory briefing that explains the Big Truckers case, the company’s financial distress and the purpose of the restructuring exercise. They are introduced to the Lien 1, Lien 2 and Equity roles, including the different claims, priorities and objectives each stakeholder brings to the situation.

2. Analysis | 45 minutes:

Teams examine their role-specific mission, the transaction background, historical financial information and supporting guidance. They assess the strength of their stakeholder’s claim, consider the likely outcome if no agreement is reached and determine the haircut they are prepared to accept. The interface then shows how this decision affects the stakeholder’s recovery percentage and recovery value.

3. Deal Structuring | 1 hour:

The Lien 1, Lien 2 and Equity teams come together within their assigned group to develop a workable restructuring outcome. Each team presents and defends its position, considers the demands of the other stakeholders and decides where concessions may be necessary. As proposed haircuts change, teams can assess whether the available value has been allocated in a way that all parties can accept.

4. Reflection | No time limit:

Once the simulation is complete, the platform presents the final recovery values, recovery percentages and agreement status for each negotiation group. Students and professors can compare teams that started from the same stakeholder position and examine why different groups reached different outcomes. The debrief can explore the effects of claim priority, bargaining leverage, compromise, bankruptcy risk and the tension between maximising recovery and completing an agreement.

Why professors use it

Connect financial distress to the capital structure

Students see how a fall in enterprise value changes expected recoveries across senior debt, subordinated debt and equity.

Make claim priority and haircuts concrete

Students calculate recovery rates, test different haircuts and see how one stakeholder’s outcome affects the value available to the others.

Create evidence for a focused restructuring debrief

Professors can compare teams representing the same role and discuss creditor rights, concessions, agreement failure and the bankruptcy alternative.

What the experience looks like

Students work through a guided, timed interface while professors manage the session from a separate admin dashboard.

Control the pace of the session

Set the time available for each stage, start the simulation and adjust the timeline when teams need more or less time.

Prepare with built-in resources

Access setup and facilitation guidance, the teaching note and the gameflow diagram from the Admin Guide.

Run and manage the session

Play starts automatic progression. Pause holds the timer in the current stage. Stop locks student screens.

Case materials students work with

Students review the Big Truckers transaction, financial position and restructuring context before preparing their role strategy. The case combines quantitative evidence about value and recoveries with qualitative information about stakeholder objectives, creditor rights, control and bankruptcy risk.

Understand the distressed capital structure

The capital structure visual compares Big Truckers’ original claims with the enterprise value available in distress.

Prepare from a stakeholder mandate

The role briefing identifies the negotiating parties and the recovery objective of the assigned stakeholder. The visible example is the Lien 1 briefing.

10 mins

Student Intro Video

The Intro stage begins with a ten-minute briefing that explains the case, stakeholder roles, aims, activities and practical success guidance.

Assessment and scoring

Assessment is optional. Professors may run the simulation as an ungraded applied activity or use its team-level results to support academic judgement.

The platform data can inform feedback and assessment, but recovery and agreement outputs should not automatically replace academic judgement about analysis, negotiation or individual contribution.

What professors can assess

• Stakeholder strategy
• Recovery and agreement outcome

How to interpret the results

• Check whether the group reached agreement
• Compare the same roles across groups

What professors can assess:

Stakeholder strategy: Consider how well the team’s position reflects the claim, priority and objectives of its assigned stakeholder.
Recovery and agreement outcome: Review the recovery achieved and whether the negotiation group completed an agreement.
Optional individual assessment report: Students may be asked to submit a short written report outside the platform once they have reviewed and reflected on their outcomes. This is not automatically captured or graded by the simulation.

How to interpret the results:

Check whether the group reached agreement: Distinguish a completed settlement from a position that protected one stakeholder but prevented a collective deal.
Compare the same roles across groups: Compare Lien 1 teams with other Lien 1 teams, Lien 2 teams with other Lien 2 teams and Equity teams with other Equity teams.

Professor setup and delivery

The simulation can progress automatically after setup, while the professor retains control over timing, communication and selective coaching.

Step 1

Set up participants and stakeholder teams

Assign students to Lien 1, Lien 2 and Equity teams. The system places one team from each role into an independent negotiation group.

Step 2

Configure stage timings

Review the four stages and adjust the allocated time to suit the planned teaching format.

Step 3

Start and manage the simulation

Press Play to start or resume automatic progression. Use Pause to provide extra time and Stop when the session must be suspended.

Step 4

Monitor, coach and prepare the debrief

Review team inputs, intervene where clarification is needed and use the final recovery and agreement tables to compare outcomes.

Professor Resources

Everything needed to prepare, run and debrief the Debt Restructuring Simulation is organised within the resources below.

Debt versus equity financing
Financial distress and unsustainable capital structures
Enterprise value and priority of claims
First-lien and second-lien debt
Equity as the residual claim
Haircuts, recovery percentages and recovery values
Stakeholder incentives and debt negotiation
Out-of-court restructuring and bankruptcy
Creditor and equity-owner rights
Distressed-asset investors
Legal and regulatory considerations

Creators of the Debt Restructuring Simulation

These industry professionals were involved in the inception, creation, development, testing and optimisation of the simulation.

Former Practice Specialist in McKinsey’s Corporate Finance team in Germany and Finance professor at Aberdeen University.

Gerhard Kling

Investment banking, capital markets, PE, and corporate ratings experience at Morgan Stanley, S&P, and HPS Investment Partners. Holds a PhD in Quantitative Finance.

Gerhard Wörtche

Senior investment banker at Morgan Stanley with experience in M&A and TMT coverage across New York and San Francisco. Studied business at Kellogg.

Bharat Venugopal

Corporate finance experience across M&A, structured finance, credit risk, and leveraged finance at Morgan Stanley, SMBC, and Citi. Holds a BSc in Economics.

Georgi Naydenov

Investment banking experience across UBS, Morgan Stanley, and Deutsche Bank. Studied Mathematics at Saratov University.

Andrey Simonov

FAQs

Big Truckers has €500 million of debt and equity claims but only €260 million of enterprise value. Students must therefore apply claim priority to determine how much value is available before proposing haircuts and recoveries. Senior claims are considered before subordinated claims and equity, so a change in the value allocated to one layer affects what remains for the next. The simulation turns the priority waterfall into a live negotiation over a fixed and insufficient pool of value.

A waterfall calculation usually applies a predetermined enterprise value and claim order to produce an indicative payout. The simulation begins with that analytical foundation but then requires students to represent competing stakeholders, set proposed haircuts, calculate recoveries and negotiate an out-of-court settlement. This reveals that knowing the priority rules does not by itself resolve the deal. Students must also communicate, compare alternatives and decide which economic concessions their role can defend.

A junior stakeholder starts with a weaker priority position and may have limited recovery if senior claims absorb most of the available value. Accepting a greater haircut can be rational if the negotiated package preserves some recovery and makes an out-of-court agreement possible. The decision is not simply about conceding more; it is about comparing the proposed recovery with the stakeholder’s realistic alternative. Professors can use this to discuss bargaining power, reservation outcomes and why legal priority shapes commercial negotiation.

No. Agreement is an important process outcome, but the quality of the recovery and the reasoning behind the concessions also matter. A team may reach agreement by giving away value that its role could reasonably have protected, while another may secure a stronger same-role recovery through a more disciplined proposal. Professors should compare teams that began with the same claim and objective, review the haircuts and recoveries, and consider whether the final settlement reflects the priority structure and the evidence available.