debt restructuring

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Debt restructuring

Modification of the terms of a loan to provide relief to a debtor who could otherwise default on payments. The restructuring may involve extending the period of repayment, reducing the total amount owed, or exchanging a portion of the debt for equity in the debtor company. Also see extension, composition, debt-for-equity swap.

Debt Restructuring

The process of a person or business negotiating and agreeing with its creditors to reduce its debt or to revise a repayment plan. Debt restructuring often occurs when a person or company has taken on too much debt and is in danger of bankruptcy. Debt restructuring is beneficial to the person or company requesting it because it often results in a significant discount and/or a more flexible repayment schedule. It is usually less expensive than a bankruptcy would be. Likewise, it is beneficial to the creditors because a bankruptcy will likely result in some debt being discharged; creditors generally prefer debt restructuring because they would rather be paid less than not paid at all. See also: debt-to-equity swap, restructuring, capital structure.

debt restructuring

An exchange of one or more new debt issues for outstanding debt issues that can occur when the new issues have interest rates and/or maturities that differ from those of the outstanding issues. For example, a firm might offer holders of 9% coupon bonds with 5 years to maturity a new bond with a higher-coupon rate and a 25-year maturity. Creditors having difficulty making interest and/or principal payments often restructure their debt to reduce the size of the interest payments and to extend debt maturity. Also called troubled debt restructuring. Compare restructuring.
References in periodicals archive ?
Global Banking News-October 26, 2016--Chinese commercial banks increase capital for debt-for-equity swaps
Chinese commercial banks have started to raise funds for debt-for-equity swaps at state-owned enterprises.
China Construction Bank is to manage up to 50 debt-for-equity swaps, using funds raised in part from new wealth management products (WMPs).
This outcome is associated with the capacity of the former group of banks to employ a wider range of debt-reduction techniques, including sales, exchanges for other credits, and debt-for-equity swaps.
banking organizations additional flexibility in managing their exposure through debt-for-equity swaps.
It should be noted, however, that a significant number of debt-for-equity investments are being made under the original portfolio investment provisions of Regulation K.