Business Debt Restructuring: Breather For A Turn Around

Posted: Mar 07, 2011 |Comments: 0 |

Business Debt Restructuring is a strategic move by company management with outstanding liabilities to modify the terms and conditions of the debt agreement.  The existing debt is replaced by a new debt. It is called "refinancing" if your company is not in a financial distress situation. If there is a cash flow problem and you are not being able to make payments when the due date comes, debt restructuring is an option.

Whatever your positioning is, the objective is to avoid being declared in default and incur penalties. Another reason is for you to be able to gain advantage of a better interest rate package. Another effective strategy is thru the issuance of callable bonds.  Companies can avail of their option to restructure a debt obligation at anytime in the future. The right time to make a call is when interest rates go down. Callable bonds can be redeemed by the issuer before its maturity date. You just pay a premium when calling the bond.

Debt restructuring can be availed of thru a pre-negotiated arrangement with creditors, thru voluntary or involuntary court proceedings or with court supervision and monitoring.  If a court filed debt restructuring plan is not approved by the court, the next step is the liquidation of the assets of the debtor for distribution to the creditors. Two financial rehabilitation options ordinarily offered to creditors are the Debt to Equity with a preferred guaranteed rate of return and an agreed exit clause and Dacion en pago or settlement in kind deals.

Due to economic crises and cash flow deficits, you may avail of business debt restructuring. The primary goal is long term sustainability of operations and proper debt management .Keep your company's books of accounts in order for accurate reporting. Restructuring schemes should match your financial projections. Definitely, there will be a negative perception and some customers will no longer patronize your business. Do your best to mitigate the negative consequences and one strategy is to hire a top notch turn around management consultant. He can assist you evaluate the impact and implications of debt restructuring. The consultant can help you formulate a comprehensive turn around program to make sure that the approved debt repayment plan is complied with. When you maintain a 
good paying record, your business credit score improves. Eventually, when you keep this up, you will be back on your feet and operating again on your own!

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    Source:  http://www.articlesbase.com/business-articles/business-debt-restructuring-breather-for-a-turn-around-4359316.html

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