Debt Restructuring

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DEBT RESTRUCTURING

Debt restructuring is a process used by companies facing cash flow problems or financial distress to avoid the risk of default. It can be carried out by reducing the interest rates on loans or by extending the payment term. It can also include a debt for equity swap which means that company’s creditors may agree to cancel some or all of the debt in exchange for equity in the company. It can also involve a bond haircut where the company may negotiate to write off certain portion of interest or capital. Restructuring debt can be a win-win for both entities as the company avoids bankruptcy and the lenders typically receive more than what they would through a bankruptcy proceeding.

RBI Guidelines