Debt restructuring, raising capital and M&A services Global
This occurs when creditors agree to cancel a portion, or all, of a company’s outstanding debts in exchange for equity in the business. The swap is usually a preferred option when both the outstanding debt and the company’s assets are significant and forcing the business to cease operations would be counterproductive. The creditors would rather take control of the distressed company, if that’s necessary, as an ongoing concern.
Sri Lanka is the most recent example of a country at risk of stalled negotiations due to the disconnect among creditors. Having defaulted in May 2022, the country must now work with its creditors and the IMF to restructure its debt and return to financial sustainability. However, China owns a reported 26 percent of the debt in question, meaning that any solution will need the country’s buy-in.
Debt restructuring, raising capital and M&A services
For companies considering a transaction, it is critical to develop a holistic strategy to properly react, recover and shape their futures. Focusing on the tax, legal, and workforce consequences of transformational change, we help you maximize value with integrated solutions. Assist in raising new debt, equity or hybrid capital from local and international investors. Achieving 債務重組 can be a challenge when a company is facing disruption to its operations and profitability. Legacy obligations may require refinancing or rescheduling, historically passive stakeholders may become activist and traditional capital market options may be closed . The insights and services we provide help to create long-term value for clients, people and society, and to build trust in the capital markets.
Key questions and additional reading from CGD for policymakers
One case where such a debt–equity swap, or recapitalization, was used as a defensive measure involved Activision, an international developer, publisher, and distributor of video games and other interactive entertainment products. In the early 1990s, the company found itself in so much debt that management felt that it threatened Activision’s prospects for survival. The company had $25 million in claims against it and a market value of only $2 million. Among the most common forms of in-court debt restructuring for firms in the United States are Chapter 11 and Chapter 12 bankruptcy. Economist Joseph Stiglitz testified that bank bailouts “are really bailouts not of the enterprises but of the shareholders and especially bondholders. There is no reason that American taxpayers should be doing this”. He wrote that reducing bank debt levels by converting debt into equity will increase confidence in the financial system.
Construction of new solar panel projects would be paid for by investors, whose financial returns would be guaranteed by the cash flow from the project once it became operational. In the course of pursuing remedial measures, the authorities had difficulty in sizing up the magnitude of insolvency because of non-transparent accounting practices at chaebols. So, the agreement seeks to encourage greater transparency, accountability and competition. Reducing corporate indebtedness and raising accounting standards to international levels are also receiving top priority. Specific measures include improvement of accounting and auditing standards, better corporate governance, more restrictive rules on classification, limitations on bond market financing and gradual elimination of cross payment guarantees.
TerraForm Power was the first of SunEdison’s yield cos to go public in July 2014. Investors snapped up the shares in the low interest rate environment of the period driving the firm’s share price up by 21% by the end of the year. But as SunEdison’s growth accelerated so did its debt, which totaled $16.1 billion by September 2015. To keep cash dividends paid to investors high, the yield cos had to continually acquire projects which drove up valuations of renewable companies. SunEdison saw itself as a company that sold solar power without having to shoulder the cost of building a solar farm, fields of solar panels designed to capture the sunlight for conversion into electricity. SunEdison would sign contracts called power purchase agreements enabling the customer to buy solar power generation at a fixed price over time without having to make any upfront payments.
A company will often issue callable bonds to protect itself from a situation in which it can’t make its interest payments. A bond with a callable feature can be redeemed early by the issuer in times of decreasing interest rates. This allows the issuer to restructure debt in the future because the existing debt can be replaced with new debt at a lower interest rate.
Refinancing your debt means taking out a new loan to pay off your existing debts. You will, however, have to qualify for the new loan based on your credit score and income. Musokotwane added private creditors were cooperating well in debt relief discussions and there had been a bondholder meeting this week. Zambia defaulted on its sovereign debt in 2020 and the current government, which took power last year, has been on a quest to restructure its loans and rebuild an economy ravaged by mismanagement under previous administrations and COVID-19.
A company that is considering debt restructuring is likely experiencing financial difficulties that cannot be easily resolved. Under such circumstances, the company faces limited options – such as restructuring its debts or filing for bankruptcy. Restructuring existing debts is obviously preferable and more cost-effective in the long term, as opposed to filing for bankruptcy.
The public knows that a survey by Edelman, a public relations firm, found that only 13 percent of the people trust political leaders to tell the truth. A decision on disbursing the new bailout funds for Greece has been time and again delayed until the Troika, and then Euroland’s finance ministers, approve—and they approve only if they believe the Greek government has lived up to its promises. These are the bailout’s conditions which include deep wage cuts and plenty of layoffs in the outsized public sector. Earlier responses to unemployment consisted of providing temporary jobs through public works and SOC projects. After concerns were raised about the effectiveness of spending public money to create jobs, more serious attempts have been made to induce business formation, especially through joint ventures with foreign companies.