Debt restructuring is a process used by businesses, individuals, and even countries to avoid the risk of default on existing debt, for example by negotiating low interest rates. When a debtor is in a financial crisis, debt restructuring can provide a cheaper alternative to bankruptcy and benefit both borrowers and creditors.
Some companies are trying to restructure their debt in the face of bankruptcy. The debt restructuring process typically requires the lender to lower the interest rate on the loan, extend the term of the company’s debt, or both. These measures increase the likelihood that the company will repay its obligations and resume its business. Creditors understand that if a business goes bankrupt or is forced into liquidation, it will receive even less money. Debt restructuring can be beneficial to both parties, as businesses avoid bankruptcy and lenders often receive more than they receive in bankruptcy proceedings.
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