Restructuring

<h2 id="corporate-debt-restructuring">Corporate debt restructuring</h2>
<p>Corporate <a href="/facts/Debt_restructuring/J17klG1J">debt restructuring</a> is the reorganization of companies' outstanding liabilities. It is generally a mechanism used by companies which are facing difficulties in repaying their debts. In the process of restructuring, the credit obligations are spread out over a longer period with smaller payments. This can better allow the company to meet its debt obligations. Also, as part of this process, some creditors may agree to exchange debt for some portion of equity. Working with companies in this way in a timely and transparent manner may go a long way to ensure their viability, which is sometimes threatened by internal and external factors. The restructuring process attempts to resolve the difficulties faced by a corporate body and enable it to become viable again.
</p><p>Steps:
</p>
<ul><li>Ensure the company has enough liquidity to operate during implementation of a complete restructuring</li>
<li>Produce accurate working capital forecasts</li>
<li>Provide open and clear lines of communication with creditors who mostly control the company's ability to raise financing</li>
<li>Update detailed business plan and considerations<a class="footnote-ref" id="fnref:1" href="#fn:1"><sup>1</sup></a></li></ul>
<h2 id="valuations-in-restructuring">Valuations in restructuring</h2>
<p>In corporate restructuring, <a href="/facts/Valuation_(finance)/ubVtk8RG">valuations</a> are used as <a href="/facts/Negotiating/QyUsoN6M">negotiating</a> tools and more than third-party reviews designed for litigation avoidance. This distinction between negotiation and process is a difference between financial restructuring and <a href="/facts/Corporate_finance/ugQCsFBQ">corporate finance</a>.<a class="footnote-ref" id="fnref:2" href="#fn:2"><sup>2</sup></a>
</p><p>From the point of view of <a href="/facts/Transfer_pricing/bcpUV2X0">transfer pricing</a> requirements, restructuring may entail the need to pay the so-called <a href="/facts/Pricing/e2r3HKdI">exit fee</a> (exit charge).<a class="footnote-ref" id="fnref:3" href="#fn:3"><sup>3</sup></a><a class="footnote-ref" id="fnref:4" href="#fn:4"><sup>4</sup></a>
</p><p>See <a href="/facts/Valuation_(finance)/ubVtk8RG">Valuation (finance) § Valuation of a suffering company</a> for discussion of the approaches taken.
</p>
<h2 id="restructuring-in-europe">Restructuring in Europe</h2>
<h3>The "London Approach"</h3>
<p>Historically, European banks handled non-investment grade <a href="/facts/Lending/bPaAc9HT">lending</a> and <a href="/facts/Capital_structure/QvaskVso">capital structures</a> that were fairly straightforward. Nicknamed the "London Approach" in the UK, restructurings focused on avoiding debt write-offs rather than providing distressed companies with an appropriately sized balance sheet. This approach became impractical in the 1990s with <a href="/facts/Private_equity/DpqoqjBH">private equity</a> increasing demand for highly leveraged capital structures that created the market in high-yield and <a href="/facts/Mezzanine_debt/VEpEPNCd">mezzanine debt</a>. Increased volume of distressed debt drew in <a href="/facts/Hedge_fund/LYsk45YD">hedge funds</a> and credit <a href="/facts/Derivative_(finance)/jx4CbakW">derivatives</a> deepened the market—trends outside the control of both the regulator and the leading commercial banks.
</p>
<h2 id="characteristics">Characteristics</h2>
<ul><li>Cash management and cash generation during crisis</li>
<li>Impaired Loan Advisory Services (ILAS)</li>
<li>Retention of corporate management in the form of "stay bonus" payments or equity grants</li>
<li>Sale of underutilized <a href="/facts/Asset/o7TARXhB">assets</a>, such as <a href="/facts/Patent/LjT2bG3A">patents</a> or brands</li>
<li><a href="/facts/Outsourcing/qa3WgJ7u">Outsourcing</a> of operations such as payroll and technical support to a more efficient third party</li>
<li>Moving of operations such as manufacturing to lower-cost locations</li>
<li>Reorganization of functions such as sales, marketing, and distribution</li>
<li>Renegotiation of labor contracts to reduce <a href="/facts/Overhead_(business)/KodqdRBp">overhead</a></li>
<li>Refinancing of corporate <a href="/facts/Debt/VDKsvv1q">debt</a> to reduce interest payments</li>
<li>A major <a href="/facts/Public_relations/mQJUIuWQ">public relations</a> campaign to reposition the company with consumers</li>
<li>Forfeiture of all or part of the ownership share by pre-restructuring stock holders (if the remainder represents only a fraction of the original firm, it is termed a <a href="/facts/Stub_(stock)/GgomwQTF">stub</a>)</li>
<li>Improving the efficiency and productivity through new investments, <a href="/facts/R%2526D/2h5UddUu">R&D</a> and <a href="/facts/Business_engineering/DpoemFGV">business engineering</a>.</li>
<li>Liability management transactions such as trapdoors</li></ul>
<h2 id="results">Results</h2>
<p>A company that has been restructured effectively will theoretically be leaner, more efficient, better organized, and better focused on its core business with a revised strategic and financial plan. If the restructured company was a leverage acquisition, the parent company will likely resell it at a profit if the restructuring has proven successful.<a class="footnote-ref" id="fnref:5" href="#fn:5"><sup>5</sup></a>
</p>
<h2 id="see-also">See also</h2>
<ul><li><a href="/facts/Bankruptcy/EAztPnMf">Bankruptcy</a></li>
<li><a href="/facts/Chainsaw_Al/1phTlghf">Chainsaw Al</a></li>
<li><a href="/facts/Compromise_agreement/ybneyr8h">Compromise agreement</a></li>
<li><a href="/facts/Creditor/kfEGTSzr">Creditor</a></li>
<li><a href="/facts/Debt/VDKsvv1q">Debt</a></li>
<li><a href="/facts/Demerger/286naYy0">Demerger</a></li>
<li><a href="/facts/Layoff/8Nc5HRHV">Downsizing</a></li>
<li><a href="/facts/Insolvency/hU1Ngart">Insolvency</a></li>
<li><a href="/facts/Layoff/8Nc5HRHV">Layoff</a></li>
<li><a href="/facts/Presidential_Task_Force_on_the_Auto_Industry/uxb1rTSm">Presidential Task Force on the Auto Industry</a></li>
<li><a href="/facts/Spin-out/AAdmMr3u">Spin-out</a></li>
<li><a href="/facts/Stub_(stock)/GgomwQTF">Stub (stock)</a></li>
<li><a href="/facts/Voluntary_redundancy/lKH0HbJL">Voluntary redundancy</a></li></ul>

<h2 id="external-links">External links</h2>
<ul><li><a href="http://weblog.infoworld.com/techwatch/archives/001685.html">Infoworld - "HP to slash 14,500 jobs in major restructuring move"</a> <a href="https://web.archive.org/web/20051212123937/http://weblog.infoworld.com/techwatch/archives/001685.html">Archived</a> 2005-12-12 at the <a href="/facts/Wayback_Machine/nmQ3a6JC">Wayback Machine</a></li>
<li><a href="https://web.archive.org/web/20101203061958/http://www.cbc.ca/news/story/2005/07/15/stelco-050715.html">CBC News - "Stelco unveils restructuring plan"</a></li>
<li><a href="http://www.traceproject.org/">Web site of the TRACE Project, a large scale European trade union project that has created a mass of resources, training materials, etc about restructuring</a></li>
<li><a href="https://trendingstoriees.com/loan-restructuring-vs-loan-refinancing/">Current Financial News from Trending Storiees </a></li>
<li><a href="http://www.mire-restructuring.eu/">Web site of the MIRE Project (Monitoring Innovative Restructuring in Europe) including thematic analysis and 30 case studies</a> <a href="https://web.archive.org/web/20170911134837/http://mire-restructuring.eu/">Archived</a> 2017-09-11 at the <a href="/facts/Wayback_Machine/nmQ3a6JC">Wayback Machine</a></li>
<li><a href="http://econstra.com/">Corporate Restructuring Consultants India</a></li>
<li><a href="https://ec.europa.eu/employment_social/anticipedia/document/show.do?id=2952">European Restructuring Toolbox on Anticipedia web site of the European Commission</a></li>
<li><a href="http://www.ipg.uni-bremen.de/research/hires/final_report.php">Health in Restructuring: Innovative Approaches and Policy Recommendations (HIRES)</a>[<i>permanent dead link</i>]</li>
<li><a href="https://web.archive.org/web/20160206083806/https://www.eurofound.europa.eu/observatories/european-monitoring-centre-on-change-emcc/european-restructuring-monitor">European Restructuring Monitor (Eurofound)-</a> Tracks large-scale restructuring events in Europe and covers the 28 EU Member States plus Norway</li></ul>

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

<ol>
<li id="fn:1"><p>Norley, Lyndon; Swanson, Joseph; Marshall, Peter (2008). A Practitioner's Guide to Corporate Restructuring. City Financial Publishing. pp. xix, 24, 63. ISBN 978-1-905121-31-1. <a href="978-1-905121-31-1" target="_blank">978-1-905121-31-1</a> <a href="#fnref:1" class="footnote-back-ref">↩</a></p></li>
<li id="fn:2"><p>Norley, Lyndon; Swanson, Joseph; Marshall, Peter (2008). A Practitioner's Guide to Corporate Restructuring. City Financial Publishing. pp. xix, 24, 63. ISBN 978-1-905121-31-1. <a href="978-1-905121-31-1" target="_blank">978-1-905121-31-1</a> <a href="#fnref:2" class="footnote-back-ref">↩</a></p></li>
<li id="fn:3"><p>"Business restructuring: Exit charges for restructurings in Europe | International Tax Review". www.internationaltaxreview.com. 17 December 2012. Retrieved 2017-12-23. <a href="http://www.internationaltaxreview.com/Article/3132162/Business-restructuring-Exit-charges-for-restructurings-in-Europe.html" target="_blank">http://www.internationaltaxreview.com/Article/3132162/Business-restructuring-Exit-charges-for-restructurings-in-Europe.html</a> <a href="#fnref:3" class="footnote-back-ref">↩</a></p></li>
<li id="fn:4"><p>Noah, Peter. "Wealth management". Retrieved 10 March 2024. <a href="https://www.instagram.com/x.moneylead" target="_blank">https://www.instagram.com/x.moneylead</a> <a href="#fnref:4" class="footnote-back-ref">↩</a></p></li>
<li id="fn:5"><p>"Loan Restructuring Guide". 14 November 2019. <a href="https://www.wealthyyou.com.au/restructuring-loan/" target="_blank">https://www.wealthyyou.com.au/restructuring-loan/</a> <a href="#fnref:5" class="footnote-back-ref">↩</a></p></li>
</ol>

Restructuring open-in-new

Restructuring