Corporate Debt Restructuring

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DEFINITION of 'Corporate Debt Restructuring'

The reorganization of a company's outstanding obligations, often achieved by reducing the burden of the debts on the company by decreasing the rates paid and increasing the time the company has to pay the obligation back. This allows a company to increase its ability to meet the obligations. Also, some of the debt may be forgiven by creditors in exchange for an equity position in the company.

INVESTOPEDIA EXPLAINS 'Corporate Debt Restructuring'

The need for a corporate debt restructuring often arises when a company is going through financial hardship and is having difficulty in meeting its obligations. If the troubles are enough to pose a high risk of the company going bankrupt, it can negotiate with its creditors to reduce these burdens and increase its chances of avoiding bankruptcy. In the U.S., Chapter 11 proceedings allow for a company to get protection from creditors with the hopes of renegotiating the terms on the debt agreements and survive as a going concern. Even if the creditors don't agree to the terms of a plan put forth, if the court determines that it is fair it may impose the plan on creditors.

RELATED TERMS
  1. Restructuring Charge

    A one-time cost that must be paid by a company when it reorganizes. ...
  2. Chapter 11

    Named after the U.S. bankruptcy code 11, Chapter 11 is a form ...
  3. Creditor

    An entity (person or institution) that extends credit by giving ...
  4. Bankruptcy Risk

    The possibility that a company will be unable to meet its debt ...
  5. Going Concern

    A term for a company that has the resources needed in order to ...
  6. Corporate Refinancing

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