Restructuring may be defined as a fundamental, considerable or even drastic change made to, or reorganization of operations, liabilities or other structures of a firm (or organization or company). The change modifies relationships between varied elements or components of the firm.
When and Why Restructuring is Done
Restructuring is typically resorted to when a company is facing major problems responsible for financial harm or even jeopardizing the overall business. The company’s hope is that the significant change would eradicate the financial danger and enhance business. Restructuring can also help to better organize a company for its current requirements.
Executives associated with restructuring frequently hire legal and financial advisors to help with the negotiation and transaction details. The task(s) may also be performed by a new CEO appointed specifically to make the controversial and complicated decisions needed to reposition or save the company.
What is Corporate Debt Restructuring?
Corporate debt restructuring is a process of reorganizing a company’s pending liabilities. Companies that are struggling to repay their debts resort to corporate debt restructuring to improve their capacity to meet the obligations. The reorganization is frequently achieved by lessening the load of debts on the company by spreading out credit obligations over a longer period with smaller payments. Some creditors may consent to exchange arrears for a part of equity. The basis for this is the theory that restructuring facilities accessible to companies in a transparent and timely manner can help a long way in guaranteeing their feasibility which may at times be threatened by factors – internal and external.
Mergers, liquidations, spin-offs, tender offers and divestitures are some examples of key corporate restructuring transactions.
The majority of companies restructure either to avoid bankruptcy or as part of it. If the restructuring is an element of corporate bankruptcy, the company is stated to be in receivership.