Financial restructuring involves the series of financial actions and transactions taken to restructure the organization’s assets and liabilities so that there is continuous and promising growth in the business.

Debt Restructuring: Debt restructuring involves negotiation with lending facilities and creditors to reduce the outstanding debts. Using debt restructuring, businesses can benefit from lower interest rates, extended credit limits, escaping defaulting on loans etc. It restructures the debt/s by relocating by way of changing the terms of debt.

Normal Restructuring: Normal restructuring is done typically by healthy businesses. They restructure their debts by converting high-interest rate debts to low-interest rate debts or revise payment schedules that suit the business. The organization can also opt for restructuring multiple loans and its repayment structures by converting them into single loans at low-interest rate with unified repayment terms. 

Stressed Restructuring: Stressed restructuring is a business strategy that helps keep the business afloat by streamlining its finances. Adjustments are usually made by the lender, or creditor etc. Stressed restructuring is required for an organization under financial stress or liquidity issues. They restructure their debt obligations to obtain more flexibility in the short term so that the debts are more manageable. 

Conversion of Debt to Equity: A debt-equity swap usually occurs when the business is undergoing some kind of financial distress. The lender, after assessing the viability of the business and the commitment of the promoters, then decides to support the business. Also known as Swap, conversion of debt to equity is the financial restructuring arrangement between the organization and the lender that allows the organization to convert its debts into equity. In layman’s terms, the lenders/debt providers turn into the owners of the business.

Equity Restructuring: Equity restructuring is the course of restructuring equity capital.Equity restructuring involves legal procedure, and may require the supervision of corporate professionals for effective meeting of goals after relocating the shareholders’ capital and the reserves reflecting in the balance sheet. 

• Unable to meet current business expectations
• Irregular use of existing production capacity
• Investing more capital for meeting demands from the customers
• Unable to secure more funds/credits from suppliers/investors

We provide below services under financial restructuring:

• Restructuring Plan
• One Time/Negotiated Settlement of Stressed Assets

We provide end to end solutions and assist our clients in developing timely and transparent mechanisms for restructuring their debt stack. Long working relationships with bankers, investors and stakeholders across the community has enabled us to implement best-in-class solutions for our clients. During periods of financial instability, our restructuring practice brings a holistic solution which solves these challenges. 

Although restructuring is a relief for borrowers, does restructuring affect credit rating? The answer is yes. A restructured loan in CIBIL report is reflected as such ('restructured') and this may impact your future chances of borrowing a fresh loan or opting for a credit card

Negative impact on credit score. Loans that are recorded under the one-time loan restructuring scheme negatively hits the credit history of the borrower and leads to stringent financial scrutiny in case he applies for another loan.

You may be required to provide additional guarantees or collateral or undertakings to prove that you can repay the loans under the restructured terms and conditions. The restructuring can be done by any of the following: 

• Payment rescheduling
• Moratorium
• Modifying terms of advances etc.

The latest RBI circular on the restructuring of loans has offered a one-time debt restructure to help borrowers experiencing financial hardship. After the six-month embargo period ended in August, the RBI allowed for a one-time debt modification.