When John Christmas joined Boosey & Hawkes as finance director in September 2000, he inherited a debt management operation in the UK, France, Germany, Japan and Australia. It had four music publishing businesses and had grown into a £97m-turnover company with a world-famous brand.

Its more recent past, however, was marked by a build-up of debt. Acquisitions had largely been funded by borrowings while high dividend pay-outs had only worsened the position. So, looking at the balance sheet prior to joining the company, Christmas was clear that the funding position needed sorting out. But, he says, he had no inkling as to the real scale of the problem.

The day before he was due to start work, he had a meeting with the chief executive and the company's audit partner to discuss the distribution business in Chicago. There were concerns about bad debts. The local president and CFO had been dismissed as a result. But the group was just about to announce interims, so they decided to make a provision against bad debt of £3.5m - a figure they thought would cover the situation.

Then, three months into his role as FD, Christmas actually went to Chicago. There, he discovered the debt management problem was far greater than the provision they had allowed for could possibly cover: his predecessor had left the music publisher and instrument manufacturer in May 2000, soon after the 1999 results were published, at which point, the company had a net bank debt of £52m, with gearing at 104 per cent. Ouch.

It wasn't actually a bad business but in 1999 it wouldn't even come close to being able to cover the bad debt.. He ordered a full audit and found that the company needed to write down £15.4m. Banking covenants were suddenly in default, the overall debt position was now £75m and gearing was up to 136 per cent. The FD had gone from getting comfortable in his challenging new role to organising an urgent and major financial restructuring.

Christmas initiated negotiations with a range of different stakeholders, overseas banks and bondholders. Overall, Boosey & Hawkes had no fewer than 17 different debt facilities. There were bonds outstanding and borrowings from banks and finance houses in five time zones - all with different structures and security arrangements. It was a mess.

But Christmas wanted to avoid panic measures. He was very wary of the complexity of the situation, apart from anything else. "Some lending was from very small European banks that had never lent outside their territory before," he says.

The management team had already appointed Royal Bank of Scotland as its lead bank in London. The FD then turned to a restructuring team from Deutsche Bank (the company had done some M&A work with them), to help address debt streamlining - and finding £12m in bridging loans.

Peter Collini, who headed up the Deutsche Bank team (which later became Gazelle Corporate Finance), says that the over-riding issue was to try and get support from banks and bondholders while maintaining their ranking as to claims. No easy task, with so many different parties with conflicting terms. What's more, some amounts involved were so small that he had real difficulty getting lenders to focus on the issue at all. It was, he says, one of the most complex negotiations he'd done, considering the relatively small size of the debt.

And looking to borrow money when you're losing it isn't easy. Some lenders wanted a fire sale of assets, which would have left the company and shareholders with very little value. "So we produced some projections for the businesses," says Christmas. "We had to get the banks to believe in these numbers as an end game. We had to prove that we had a decent management running [the company] with everybody's interests in mind - including theirs." The fact that he was a new face on the management team helped, he says.

It took six months to wrap up the first restructuring, getting the debts into one overall facility. It was crucial, explains Collini, to keep the banks supportive during the deal. "The first sniff of distress and you have problems," he says. No-one wins if potential asset buyers start low-balling.

Christmas and the Gazelle team managed to agree a £12m loan pending asset disposals - and the company was given until June 2002 to find ways of repaying its debts.

The management team used the time to explore disposals, including the sale of a factory site in Edgware. Those operations moved to Germany where factories had excess capacity. This move was completed in July 2002 and brought in over £10m. Boosey & Hawkes also sold its flagship offices in Regent Street, worth over £9m.

Another sale, of LA-based reed-making business Rico, was due to be launched on September 11, 2001. But the attacks on the World Trade Centre stalled this deal. "What we thought we could get on the Rico disposal would have brought the gearing down to a sensible level," says Christmas. "That was tough: we'd already committed to the banks that we'd find a way of repaying them."

The management team also needed to consider shareholders, many of whom had invested in B&H in 1995 after an earlier re-organisation at around £5 per share. Christmas wanted to ensure that they got some of their money back.

REFINANCING - THE PROBLEM AREAS

• Keeping control of the agenda. Do your funders plan to continue to back you? If they don't, you'll never successfully negotiate a refinancing package with them.
• Maintaining credibility in the eyes of funders. Unless you're coming into the situation from outside, you are, in their eyes, part of a team that has not delivered.
• Making sure you're realistic. Your expectations, business plan and cash flow forecasts have to appear reasonable. Plenty of people fall down by going into a refinancing exercise without having done a reality check or had an independent expert look over their figures.
• Being frank about future borrowing. Don't go into a refinancing exercise claiming that you don't need more money. That's bound to be incorrect and you won't want to go begging again.
• Costs. Specialist advice is expensive but worthwhile. Most refinancing deals have up-front costs but you will incur more through the process. Keep asking your adviser what it will all cost.
• Pension obligations. A pension deficit is most likely to be corrected if you keep the underlying legal entity alive. Liquidating or winding up a pension scheme shines the harsh light of publicity on any deficit and gives little scope to improve the situation.