Corporate Debt Restructuring: Second Time's the Charm?

Corporate debt restructuring is something that often takes place when a company is having financial difficulties. It involves changing the nature of the debts that have been incurred by the company. For example, the company might refinance a loan in order to get a longer repayment term. In some cases, a company will also get part of their debts forgiven because they give a portion of the company's equity to their debtors.

Impact

When a company restructures their debt, it is typically because they are in bad financial shape. For investors, this is usually a sign of better things to come. Usually, the debt becomes more manageable and the company can focus on what they manufacture or sell. Once you have made the choice to invest in a company that is restructuring their debt, the price of the stock is going to be low. Therefore, if you sell at this time, you will undoubtedly be taking a loss. If you can wait a longer, the price could rebound and you could make a nice return. While this does not always work out for the company, it can help the investor in many cases with returns later.

 

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