FINANCIAL RESTRUCTURING

Tax Account Pro   /   Financial Restructuring 

Financial Restructuring is the corporate management term for the act of reorganizing the legal, ownership, operational, or other structures of a company to make it more profitable, or better organized for its present needs.

Executives involved in restructuring often hire financial and legal advisors to assist in the transaction details and negotiation. It may also be done by a new CEO hired specifically to make the difficult and controversial decisions required to save or reposition the company. It generally involves financing debt, selling portions of the company to investors, and reorganizing or reducing operations.

The basic nature of restructuring is a zero-sum game. Strategic restructuring reduces financial losses, simultaneously reducing tensions between debt and equity holders to facilitate a prompt resolution of a distressed situation.

Steps:

1. Ensure the company has enough liquidity to operate during the implementation of a complete restructuring
2. Produce accurate working capital forecasts
3. Provide open and clear lines of communication with creditors who mostly control the company’s ability to raise financing
4. Update detailed business plans and considerations