Corporate Refinancing


DEFINITION of 'Corporate Refinancing'

The process through which a company reorganizes its debt obligations by replacing or restructuring existing debts. Refinancing may also involve issuing equity to pay off a percentage of debt.

Debt is replaced or refunded by a company with money that is raised by issuing or creating other borrowing. In restructuring, a company works with its creditor to change the terms of a loan; these terms can include the reduction of interest rates, the improvement of covenants or the extension of the loan's terms.

BREAKING DOWN 'Corporate Refinancing'

Corporate refinancing will often come about if a company is unable to meet its current obligations and needs to restructure the terms of its existing debt arrangement. This usually involves lowering the interest rate and extending the time to maturity. This happens most often when a company is near bankruptcy or is in Chapter 11 bankruptcy.

Refinancing will also occur when interest rates have fallen in the market, as the lower current market rates allows a company to cut down on the overall costs of debt a company faces. One way a company can achieve this is by calling its redeemable or callable bonds, then reissuing them at a lower rate of interest.

  1. Bond

    A debt investment in which an investor loans money to an entity ...
  2. Chapter 11

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

    1. When a business or person revises a payment schedule for repaying ...
  4. Debt Restructuring

    A method used by companies with outstanding debt obligations ...
  5. Refunding

    The process of retiring or redeeming an outstanding bond issue ...
  6. Callable Bond

    A bond that can be redeemed by the issuer prior to its maturity. ...
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