Recapitalization

<h2 id="leveraged-recapitalization">Leveraged recapitalization</h2>
<p>One example of recapitalization is a <a href="/facts/Leveraged_recapitalization/yUsTKBsS">leveraged recapitalization</a> in which the company issues <a href="/facts/Bond_(finance)/qlmpLj0k">bonds</a> to raise money and then buys back its own shares. Usually, current shareholders retain control. The reasons for such a recapitalization include:
</p>
<ul><li>Desire of current shareholders to partially exit the investment</li>
<li>Providing support of falling share price</li>
<li>Disciplining the company that has excessive cash</li>
<li>Protection from a hostile takeover</li>
<li>Rebalancing positions within a holding company</li>
<li>Help to improve the stock of the company during a time of poor economic conditions<a class="footnote-ref" id="fnref:1" href="#fn:1"><sup>1</sup></a></li></ul>
<h2 id="leveraged-buyout">Leveraged buyout</h2>
<p>Another example is a <a href="/facts/Leveraged_buyout/jTqlRzqg">leveraged buyout</a>, essentially a leveraged recapitalization initiated by an outside party. Usually, incumbent equity holders cede control. The reasons for this transaction may include:
</p>
<ul><li>Getting control over the company via a friendly or <a href="/facts/Hostile_takeover/JGfEbTy0">hostile takeover</a></li>
<li>Disciplining the company with excessive cash</li>
<li>Creating shareholder value via gradual debt repayment</li></ul>
<h2 id="nationalization">Nationalization</h2>
<p>Another example is a <a href="/facts/Nationalization/cQcRubNU">nationalization</a> in which the nation in which the company is headquartered buys sufficient shares of the company to obtain a <a href="/facts/Controlling_interest/5BDN7nGt">controlling interest</a>. Usually, incumbent equity-holders lose control. The reasons for nationalization may include:
</p>
<ul><li>Saving a very valuable company from bankruptcy</li>
<li>Confiscation of assets</li>
<li>Executing <a href="/facts/Eminent_domain/M9skdn5A">eminent domain</a></li></ul>
<p>Nationalization is essentially a move by the nation of the company to acquire controlling interest in the company, either through buying majority shares with a motive to:
</p>
<ol><li>Eliminate dominance of the shareholders</li>
<li>Own controlling interest in the company</li></ol>
<p>It can also be an attempt by the national government to rehabilitate its position financially by issuing bonds to increase public debt and meet immediate liabilities.
</p>

<h2 id="references">References</h2>

<ol>
<li id="fn:1"><p>"What is a Recapitalization". p. 1. Archived from the original on July 8, 2012. <a href="https://web.archive.org/web/20120708203146/http://www.structuringfinance.com/capital-uses/what-is-a-recapitalization" target="_blank">https://web.archive.org/web/20120708203146/http://www.structuringfinance.com/capital-uses/what-is-a-recapitalization</a> <a href="#fnref:1" class="footnote-back-ref">↩</a></p></li>
</ol>

Recapitalization open-in-new

Recapitalization