Turning Crisis into Opportunity: A Guide to Distressed Asset Restructuring in the GCC

Let's be honest: nobody plans for a financial crisis. But when one hits, the difference between collapse and comeback often comes down to how quickly you act and who's standing beside you. In the GCC, where family businesses and legacy enterprises form the backbone of the economy, distressed asset restructuring isn't just about survival. It's about preserving what generations have built while positioning for future growth.

At Licorne Gulf, we've spent over 27 years navigating the complexities of corporate finance across the Middle East. We've seen companies on the brink transform into thriving enterprises. And we've learned that crisis, when approached strategically, can become the catalyst for meaningful change.

So how do you turn financial distress into a springboard for opportunity? Let's explore.

The GCC's Evolving Restructuring Landscape

Here's the good news: the GCC has come a long way in creating a supportive environment for distressed businesses. During the 2007-2008 financial crisis, the region had virtually no established bankruptcy frameworks. Companies in trouble faced a "punishment culture" that made recovery nearly impossible.

Fast forward to today, and the landscape looks dramatically different.

The UAE enacted its new Financial Restructuring & Bankruptcy Law in 2024, while Saudi Arabia implemented comprehensive insolvency legislation back in 2018. These frameworks have shifted the focus from punishment to rescue: giving struggling businesses the legal tools they need to restructure, recover, and rebuild.

One of the most significant developments? The introduction of Debtor-in-Possession (DIP) financing. This mechanism allows distressed companies to secure new funding with priority over existing unsecured debt. For businesses caught in a cash crunch, this can be the lifeline that keeps operations running while a turnaround plan takes shape.

The UAE's 2024 law even grants courts the authority to ratify restructuring plans without unanimous creditor approval: streamlining what used to be agonizingly slow negotiations.

Why Distressed Asset Restructuring Matters Now

If you're wondering whether this is truly urgent, consider the numbers. According to S&P Capital IQ data from March 2025, the GCC ranks 5th globally in non-performing loans, with SAR 215 billion in defaulted loans. That's a disproportionate 5.5% of global NPLs despite the region comprising only 2.8% of global banking assets.

In Qatar, banks allocate 33.5% of net interest income to cover impairments. In the UAE, that figure sits at 17.3%. The message is clear: distressed situations aren't rare exceptions: they're a significant reality that demands proactive solutions.

But here's where perspective matters. These numbers don't just represent problems. They represent opportunities for strategic intervention, capital deployment, and value creation. Companies with strong fundamentals but temporary liquidity challenges can emerge stronger with the right support. Undervalued assets can find new homes with investors who recognize their potential.

The question isn't whether distressed situations exist. It's whether you have the expertise to navigate them effectively.

Core Strategies for Turnaround Success

Every distressed situation is unique, but certain strategies have proven their worth across dozens of restructurings in the GCC. Here's what works.

Standstill Arrangements and Creditor Coordination

When multiple creditors are circling, chaos can accelerate a company's decline. Standstill agreements suspend litigation and collection efforts, buying precious time for restructuring while the debtor commits not to dispose of assets.

The key is consolidating complex debt structures: often a mix of conventional facilities, Sharia-compliant financing, and US dollar obligations: into organized tranches that simplify negotiations. This isn't just administrative tidying. It's the foundation for meaningful progress.

Asset Protection Through Strategic Structures

Ring-fencing valuable assets through Special Purpose Vehicles (SPVs) isolates them from liquidation risk and protects them from non-restructuring creditors. Modern structures utilizing ADGM and DIFC vehicles with English law and Trust law provisions offer creditor-friendly frameworks with implementation flexibility.

This approach proves especially valuable today, when many distressed companies rely heavily on intangible assets: leases, franchises, licenses, intellectual property, and operational know-how. These assets require sophisticated protection strategies that traditional approaches simply don't address.

Debt-for-Equity and Debt-for-Asset Swaps

Sometimes the path forward requires converting debt into ownership. Debt-for-equity swaps transform creditors into shareholders, aligning interests and reducing immediate repayment pressure. Debt-for-asset swaps allow creditors to take ownership of specific assets, often with strategic timing to optimize sale value versus yield.

Hair-cut strategies: offering creditors reductions on swapped or remaining debt: can accelerate negotiations, particularly in later restructuring phases when creditors have gone extended periods without principal repayment.

How Licorne Gulf Approaches Distressed Situations

At Licorne Gulf, we don't see distressed asset restructuring as damage control. We see it as strategic repositioning.

Our approach draws on 27+ years of corporate finance expertise across the GCC, combining deep local knowledge with international best practices. We understand the regulatory nuances of operating in Qatar, the UAE, Saudi Arabia, and beyond. We know which doors to knock on and how to structure deals that work for all stakeholders.

Here's what that looks like in practice:

1. Rapid Assessment and Stabilization When a company is in crisis, time is the enemy. We move quickly to assess the true financial position, identify immediate threats, and implement stabilization measures that prevent further deterioration.

2. Stakeholder Alignment Successful restructuring requires getting everyone: shareholders, creditors, management, employees: rowing in the same direction. We facilitate difficult conversations and build consensus around viable paths forward.

3. Capital and Debt Intervention Whether it's arranging DIP financing, negotiating debt restructuring with lenders, or identifying strategic investors, we bring the financial resources needed to execute turnaround plans. Our proven frameworks for raising growth capital apply equally to distressed situations requiring fresh investment.

4. Operational Restructuring Financial fixes alone rarely solve underlying problems. We work with management teams to identify operational improvements, cost efficiencies, and strategic pivots that create sustainable value.

5. Legacy Preservation For family businesses, restructuring isn't just about the balance sheet. It's about preserving what previous generations built while positioning the next generation for success. We approach every engagement with this perspective.

Building Legacy Through Strategic Recovery

Let's zoom out for a moment. The GCC's substantial liquidity gap, particularly for SMEs, presents opportunities for private credit and distressed investment vehicles to provide capital through restructured formats that simply weren't available before.

IFRS 9's expected loss impairment model and Basel III alignment are creating greater regulatory focus on accurate provisioning and valuation. This facilitates more effective asset pricing and is gradually shifting traditional GCC banks' reluctance to trade non-performing assets.

What does this mean for companies facing distress? The ecosystem for recovery is stronger than ever. Legal frameworks support rescue over liquidation. Capital sources are more diverse. And experienced advisors like Licorne Gulf can guide you through complexities that would be impossible to navigate alone.

The key insight is this: distress is temporary, but the decisions you make during distress can define your legacy for decades.

Taking the First Step

If your business: or a business you're invested in: is facing financial challenges, the worst response is inaction. Early intervention dramatically improves outcomes. Waiting until creditors force your hand eliminates options and destroys value.

At Licorne Gulf, we've helped companies across the GCC transform crisis into opportunity. Our track record speaks for itself, and our commitment to client success drives everything we do.

The path from distress to recovery isn't easy. But with the right strategy, the right capital, and the right partners, it's absolutely achievable.

Ready to explore your options? Let's start the conversation.