Corporate Debt Restructuring

AAA

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. Bankruptcy

    A legal proceeding involving a person or business that is unable ...
  3. Chapter 11

    Named after the U.S. bankruptcy code 11, Chapter 11 is a form ...
  4. Bankruptcy Risk

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

    An entity (person or institution) that extends credit by giving ...
  6. Going Concern

    A term for a company that has the resources needed in order to ...
Related Articles
  1. An Overview Of Corporate Bankruptcy
    Bonds & Fixed Income

    An Overview Of Corporate Bankruptcy

  2. What are the differences between chapter ...
    Entrepreneurship

    What are the differences between chapter ...

  3. What happens to a company's stocks and ...
    Investing

    What happens to a company's stocks and ...

  4. Falling Giant: A Case Study Of AIG
    Insurance

    Falling Giant: A Case Study Of AIG

comments powered by Disqus
Hot Definitions
  1. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
  2. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  3. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
  4. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
  5. Budget Deficit

    A status of financial health in which expenditures exceed revenue. The term "budget deficit" is most commonly used to refer ...
  6. Floating Exchange Rate

    A country's exchange rate regime where its currency is set by the foreign-exchange market through supply and demand for that ...
Trading Center