Debt Restructuring
What Is Debt Restructuring?
Debt restructuring is a process used by companies or individuals to avoid the risk of default on existing debt or to take advantage of lower available interest rates.
- The debt restructuring process can be carried out by reducing the interest rates on loans or by extending the dates when a company’s liabilities are due.
- A debt restructure might include a debt-for-equity swap, when creditors agree to cancel a portion or all of the outstanding debt in exchange for equity in the company.
How Debt Restructuring Works
The debt restructuring process is typically carried out by reducing the interest rates on loans, renegotiating late fees and penalties, resolving outstanding balances, and by extending the dates when the individual’s or company’s liabilities are due to be paid, or both.
Restructuring debt can be a win-win! The business avoids bankruptcy and the lenders typically receive more than what they would through a bankruptcy proceeding.
Examples of Debt Restructuring
Individuals facing insolvency can renegotiate terms with creditors and tax authorities. For example, an individual who is unable to keep making payments on a $250,000 subprime mortgage might agree with the lending institution to reduce the mortgage to 75%, or $187,500 (75% x $250,000 = $187,500). In return, the lender might receive 40% of the proceeds of the house sale when it’s sold by the mortgagor.
Debt restructuring provides a less expensive alternative to bankruptcy when a company or individual is in financial turmoil. It’s a process through which an entity can receive debt forgiveness and debt rescheduling to avoid foreclosure or liquidation of assets.
Experience in Debt Restructuring
Nicholas Sekas and his team has countless year in working with Lenders through multiple recessions and economic downturns in Debt and Finance Restructuring. He has been a Director of a Bank for more than 17 years and has negotiated with Lenders for more than 30 years to refinance and restructure debt.
He has a team of financial advisors, accountants and staff at his disposal.
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