What Is Debt Restructuring?

Admin/ January 22, 2023/ Uncategorized/ 0 comments

The five chaebols were required to submit combined financial statements from the fiscal year 1999. Management control will be shifted to a Board of Directors with adequate monitoring by outside directors and independent auditors. Find such equity investments for 12 of the 63 firms (19%) in their sample, resulting in the investors owning a median of 54% of the reorganized firm’s stock.

Debt Restructuring

The debt restructuring process typically involves getting lenders to agree to reduce the interest rates on loans, extend the dates when the company’s liabilities are due to be paid, or both. These steps improve the company’s chances of paying back its obligations and staying in business. Creditors understand that they would receive even less should the company be forced into bankruptcy or liquidation. There is no international bankruptcy mechanism for countries that default on their external obligations. Instead, countries have historically depended on a patchwork of precedents, contracts, and conventions to bring creditors to the table for debt relief negotiations. 債務舒緩 United States has a legacy as the lead architect of large global debt relief initiatives, from the Brady Bond plan for Latin America to the Heavily Indebted Poor Countries Initiative that kickstarted debt relief for poor countries in the 1990s.

In mid-2015, SunEdison’s market value exceeded $10 billion with its shares trading at all-time highs. However, its bone crushing debt made it increasingly difficult for the firm to service its debt, forcing it to seek protection from its creditors by filing for bankruptcy in April 2016. The once Wall Street darling’s stock plummeted from its mid-2015 high of $33.44 per share to $.34 per share on the day of the bankruptcy filing announcement. Under Swiss law, debt restructuring may occur out of court, or through a court-mediated debt restructuring agreement that may provide for a partial waiver of debts, or for a liquidation of the debtor’s assets by the creditors.

However, the global creditor landscape has changed significantly over the past decade. Low-income sovereigns’ largest creditors today—China and private bondholders—operate under much different principles than the leading bilateral creditors of the past, making the traditional norms and structures less effective for present debt challenges. The objective of the international financial architecture—historically overseen by the IMF and its shareholders— will be to corral these new creditors into a cooperative arrangement to deliver on debt relief.

Alternatives to Debt Restructuring

If Greece had its own currency it would have needed to devalue by at least 40 percent to get itself into a growth path, provided that other clauses like restructuring the labor market and promoting competitiveness are fulfilled. Of course, what is written about Greece is equally valid for Spain, Italy, Portugal, Slovenia, and Cyprus. That’s contagion and the trouble with high debt is that it tends to remain excessive. Several experts think that Greece will default on its debt following an insufficient overall debt reduction and the fact that there is no economic resurgence. Moreover, the second aid package left the country in an unsustainable debt situation. There is a difference between accepting 12th-hour financing conditions and returning to growth potential.

Debt–Equity Swap

In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. We cover a broad spectrum of services from analysing capital structure options and preparing proposals, through to negotiating and implementing those solutions with all relevant stakeholders. Where required, we draw on the broader range of EY complementary services, including operational restructuring services, valuation and financial modelling services, forensic accounting and tax consulting services.

Restructuring success story: Mexico’s Brady Bonds

If you’re thinking debt restructuring isn’t right for you, here are three alternatives to consider. Each type of debt restructuring has its own advantages and disadvantages that you’ll need to consider before making a decision. An IMF spokesperson said China and other official creditors have had a number of technical questions since its staff report and Debt Sustainability Analysis for Zambia’s programme request were published.

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