Debt Restructuring

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DEFINITION of 'Debt Restructuring'

A method used by companies with outstanding debt obligations to alter the terms of the debt agreements in order to achieve some advantage.

BREAKING DOWN 'Debt Restructuring'

Companies use debt restructuring to avoid default on existing debt or to take advantage of a lower interest rate.

A company will often issue callable bonds to allow them to readily restructure debt in the future. The existing debt is called and then replaced with new debt at a lower interest rate.

Companies can also restructure their debt by altering the terms and provisions of the existing debt issue.

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