Corporate restructuring is typically designed to manage corporate debts, improve profitability and efficiency, or to incorporate other firms. Bankruptcy and negotiations with creditors are commonly used to reduce the burden of debt carried by a company. Changes to the structure of a corporate workforce or to the organizational system used by a firm can improve profitability. Mergers and takeovers allow a firm to gain control over other companies.
A large debt burden can greatly hinder corporate operations. One variety of corporate restructuring involves the modification of some or all of a corporation’s debts. This may involve securing new loans at more favorable terms or negotiations with creditors. In some cases, a corporate bond issue may be used to restructure debts.
In other cases, bankruptcy can be used as a tool for corporate restructuring. If a business is burdened by unsustainable levels of debt or faced with other serious difficulties, management may elect to enter bankruptcy proceedings. The specific laws governing this process vary, but bankruptcy typically allows a corporation to renegotiate some of its financial obligations and often involves giving bondholders an equity stake in a restructured firm.
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