Corporate Debt Restructuring

What is 'Corporate Debt Restructuring'

Corporate debt restructuring is 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.

BREAKING DOWN '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. Adjustment Bond

    Issued by a corporation during a restructuring phase, an adjustment ...
  2. Debt Restructuring

    A method used by companies with outstanding debt obligations ...
  3. Corporate Refinancing

    The process through which a company reorganizes its debt obligations ...
  4. Obligation

    The responsibility to meet the terms of a contract. If an obligation ...
  5. Receiver

    A person appointed by a bankruptcy court or secured creditor ...
  6. Corporate Lien

    A claim made against a business for outstanding debt. The debt ...
Related Articles
  1. Markets

    An Overview Of Corporate Bankruptcy

    If a company files for bankruptcy, stockholders have the most to lose. Find out why.
  2. Investing

    Difference Between Restructuring and Refinancing

    Refinancing and restructuring are very different debt reorganization processes to improve finances and avoid bankruptcy.
  3. Investing

    Refinance Vs. Debt Restructuring: What's Best For Your Credit Score?

    Discover key differences between refinancing and restructuring debt in regard to terms, the negotiation process and effect on credit scores.
  4. Investing

    Will Corporate Debt Drag Your Stock Down?

    Borrowed funds can mean a leg up for companies or the boot for investors. Find out how to tell the difference.
  5. Personal Finance

    7 Tips For The Do-It-Yourself Debt Manager

    Hired gun not in your budget? Learn to be your own credit counselor.
  6. Investing

    Alternatives To Business Bankruptcy

    Bankruptcy isn't the only alternative for a struggling business. It can try negotiating with creditors or liquidating assets outside the U.S courts.
  7. Investing

    Evaluating A Company's Capital Structure

    Learn to use the composition of debt and equity to evaluate balance sheet strength.
  8. Investing

    Total Debt to Total Assets

    Total Debt to total assets, also called the debt ratio, is an accounting measurement that shows how much of a company’s assets are funded by borrowing. In business, borrowing is also called leverage.
  9. Investing

    Taking Advantage Of Corporate Decline

    A bankrupt company can provide great opportunities for savvy investors.
  10. Markets

    How Countries Deal With Debt

    For many emerging economies, issuing sovereign debt is the only way to raise funds, but things can go sour quickly.
RELATED FAQS
  1. What happens when a corporation declares bankruptcy?

    Understand what options are available to corporations under bankruptcy protection, and learn what takes place after bankruptcy ... Read Answer >>
  2. What are some alternatives a company can attempt prior to resorting to liquidation?

    Learn the different alternatives that a company may pursue prior to liquidation. All of these options have their advantages ... Read Answer >>
  3. What are the full rights of creditors in cases of bankruptcy?

    Learn more about corporate bankruptcy and the rights of creditors. Find out how creditors are repaid in the event of bankruptcy ... Read Answer >>
  4. How long do typical debt management plans take to pay off debt?

    Find out more about how debt management plans are administered and what circumstances determine how long a management plan ... Read Answer >>
  5. What are the differences between chapter 7 and chapter 11 bankruptcy?

    Chapter 7 bankruptcy is sometimes also called liquidation bankruptcy. Firms experiencing this form of bankruptcy are past ... Read Answer >>
  6. What are some examples of a debt management plan (DMP)?

    Learn about some of the different types of debt management plans, and what you should look for when you evaluate a credit ... Read Answer >>
Hot Definitions
  1. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  2. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  3. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  4. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  5. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  6. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
Trading Center