Monday, June 10, 2019

Finding Restructuring As An Option

Companies occasionally encounter financial and operational challenges that can even lead to their demise. But one of the ways to avoid a total shutdown is through a restructuring, which reduces the level and severity of financial losses.
What does it mean?
To define it simply, restructuring involves radically changing a company's organizational, financial and operating structure so that they can permanently and swiftly address serious financial and operational issues which otherwise, if not done could lead to an untimely shutdown or liquidation. With a proper restructuring, companies change contractual relationships with shareholders, debt holders and creditors, employees and other stakeholders. It essentially acts as an in-depth reorganization conducted for the primary purpose of returning a corporation to profitability and productivity.
Debt Swap
When corporations use a financial restructuring strategy, it means that they will change the company's capital structure where they may replace debt with equity. When a company swaps out its debt, it eliminates the existing shareholders. In lieu of a bankruptcy or liquidation, the debt holders take over the company's assets and the general rules state that they can claim on future earnings. It can be done in the form of newly issued shares. Debt holders may or may not accept this arrangement as the elimination of the interest and principal payments significantly strengthens the company's financial position. Typically, the shareholders receive nothing.
Debt Loading
Sometimes, a corporation may load the balance sheet with debt to finance the buy of present shareholders. This is referred to as a leveraged buyout and is a common debt loading strategy. Companies use this strategy to enable one founder to buy out the shares of his co-founders. The corporation then again purchases and retires the shares and then uses its cash flow to pay down the debt.
The WKH professional team consists of entrepreneurs and corporate executives who provides management advisory services. White Knight Holdings focuses on the opportunity rather than the industry. So, they want to help the shareholders and their businesses in many ways by advising them on investing management expertise and capital.

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