Question

What financial resructuring tools/methods can be used in (balance sheets/financial staments/income statements) with financially distressed companies (those who are in trouble of defualting and/or bankruptcy)?

Answer 1

Following are the financial resructuring tools that can be used for financially distressed companies;

1. Debt restructuring

2. Equity restructuring

Now let’s discuss both tools one by one in detail;

1. Debt restructuring;

Under this method a company reorganize items of debt funds. With the help of debt restructuring company try to minimize the costs of the debts with the help of using low cost debt options. Debt restructuring includes following methods;

·        Restructuring of secured long-term borrowings

·        Restructuring of unsecured long-term borrowings

·        Restructuring of secured working capital borrowings

·        Restructuring of other short-term borrowings

2. Equity restructuring;

Under this method a company reorganize items of equity funds. With the help of equity restructuring company try to resuffle the items of shareholders’ funds like reorganizing of types of existing shares with new types of share and resuffling of available reserves & retained earnings. Equity restructuring includes following methods;

·        Spin-offs

·        Equity Carve Out

·        Split-off

·        Liquidation

·        Divesture