Understanding Corporate Debt Restructuring: A Brief Guide
The term "corporate debt restructuring" describes the realignment of a business entity experiencing financial distress due to its unpaid debts and obligations and the injection of liquidity into operational activities to keep it afloat. The management of the distressed company and the creditors typically carry out this process.
Generally, banks and non-bank financial companies are corporate creditors (NBFCs). Restructuring a company's debt is accomplished by reducing the amount owed. As a result, the interest rate has also decreased. However, the repayment period has been lengthened, making it easier for the business to settle the debt.
Sometimes the creditors would forgive a portion of the company's debt. However, that would be in exchange for company stock. Nevertheless, this type of arrangement is better for the struggling company than declaring bankruptcy and going through the arduous processes.