MOST EFFECTIVE CAPITAL STRUCTURE IS THE CORNERSTONE BEHIND THE LONG TERM SUCCESS OF ANY ENTITY.
Debt restructuring is a process that allows an entity, facing cash flow problems and financial distress, to reduce and renegotiate its delinquent debts in order to improve or restore liquidity to be able to continue its operations. The need for a corporate debt restructuring often arises when a company is going through financial hardship and is having difficulty in meeting current obligations. When the troubles are severe enough to pose a high risk to the company for bankruptcy, they can negotiate with their creditors and lenders to reduce these burdens and increase their chances of avoiding bankruptcy.
Replacement of old debt by new debt when not under financial distress is called “refinance”.
Converting short term lending into long term debt (and vice versa), issuance of equity in lieu of liabilities, restructuring of debt payment plans, replacement of old debts with new debts, settlements, etc., are some of the methods used here. The main expense associated with debt restructuring is the time and effort required to negotiate with bankers, creditors, vendors, and tax authorities.
We can assist in addressing liquidity shortfalls and negotiating a restructuring of liabilities and debts with banks, FIs, creditors, etc., which will help overcome the present liquidity crises and improve the efficiency of fund utilization.
As an independent advisor we will do an in-depth analysis of the current situation of the client. Our important steps toward a restructuring of debts are:
- Review of the current financial position, current capital structure, and current organizational objectives of the company to understand how the present structure performs
- Detailed Business and Cash Flow projections will be made to assess the requirements of operational cash flow, funding requirements, future performance, future financial position and debt serving capacity
- Identification of the alternative restructuring scenarios and analysis of their impact on the future financial performance of the company
- Negotiations with banks, FIs and creditors, to restructure the liabilities to the most favorable and viable structure of capital