Corporate Debt Restructuring

A A A

DEFINITION

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

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. A restructuring ...
  2. Bankruptcy Risk

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

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

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

    The process through which a company reorganizes its debt obligations by replacing ...
  6. Bankruptcy

    A legal proceeding involving a person or business that is unable to repay outstanding ...
  7. Chapter 11

    Named after the U.S. bankruptcy code 11, Chapter 11 is a form of bankruptcy ...
  8. Succession Planning

    A strategy for passing each key leadership role within a company to someone ...
  9. Ltd. (Limited)

    An abbreviation of "limited," Ltd. is a suffix that follows the name ...
  10. BHD (Berhad)

    The suffix Bhd. is an abbreviation of a Malay word "berhad," which ...
Related Articles
  1. An Overview Of Corporate Bankruptcy
    Bonds & Fixed Income

    An Overview Of Corporate Bankruptcy

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

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

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

    What are the differences between chapter ...

  4. The Path To Becoming A CEO
    Professionals

    The Path To Becoming A CEO

  5. Top 8 Ways Companies Cook The Books
    Personal Finance

    Top 8 Ways Companies Cook The Books

  6. Has Stock Bias Affected Your ETF Asset ...
    Bonds & Fixed Income

    Has Stock Bias Affected Your ETF Asset ...

  7. How To Invest In Corporate Spin-offs
    Chart Advisor

    How To Invest In Corporate Spin-offs

  8. Wall Street’s Glass Ceiling
    Professionals

    Wall Street’s Glass Ceiling

  9. Understanding The Top SEC filing forms
    Investing Basics

    Understanding The Top SEC filing forms

  10. How Does Goodwill Affect Stock Prices?
    Investing Basics

    How Does Goodwill Affect Stock Prices?

comments powered by Disqus
Hot Definitions
  1. National Best Bid and Offer - NBBO

    A term applying to the SEC requirement that brokers must guarantee customers the best available ask price when they buy securities and the best available bid price when they sell securities.
  2. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and FINRA, after an investor has bought securities on margin, the minimum required level of margin is 25% of the total market value of the securities in the margin account.
  3. Leased Bank Guarantee

    A bank guarantee that is leased to a third party for a specific fee. The issuing bank will conduct due diligence on the creditworthiness of the customer looking to secure a bank guarantee, then lease a guarantee to that customer for a set amount of money and over a set period of time, typically less than two years.
  4. Degree Of Financial Leverage - DFL

    A ratio that measures the sensitivity of a company’s earnings per share (EPS) to fluctuations in its operating income, as a result of changes in its capital structure. Degree of Financial Leverage (DFL) measures the percentage change in EPS for a unit change in earnings before interest and taxes (EBIT).
  5. Jeff Bezos

    Self-made billionaire Jeff Bezos is famous for founding online retail giant Amazon.com.
  6. Re-fracking

    Re-fracking is the practice of returning to older wells that had been fracked in the recent past to capitalize on newer, more effective extraction technology. Re-fracking can be effective on especially tight oil deposits – where the shale products low yields – to extend their productivity.
Trading Center