#IRL
Sample this report from Bloomberg dated June 2nd 2017,
"On Friday, two days after RCom’s debt (INR 45,000 crores) was downgraded to ‘default’ by credit rating agencies, the consortium met in Mumbai to discuss the future course of action for the company. The meeting was called by State Bank of India, the lender with the maximum exposure to the telecommunications company. After a discussion among themselves, and reviewing a plan submitted by the company, the consortium decided to invoke the strategic debt restructuring (SDR) scheme of the Reserve Bank of India (RBI).
Under the SDR scheme, lenders are allowed to convert debt to majority equity in a company, which they will sell to a deserving buyer to recoup their money. This, in turn, helps in improving the credit profile of the company since the new owner’s rating and its ability to infuse fresh funds will be considered before selecting a buyer."
The finance professionals involved in the above restructuring exercise would be from the following domains Transaction Advisory (a consulting firm like EY, KPMG, PwC ETC.) and/or Investment Banking (any Indian or global bank's IB arm) and Corporate Finance (the restructured company's Corporate Finance team).
What is 'Corporate Debt Restructuring?'
Corporate debt restructuring is the reorganization of a company's outstanding obligations, often achieved by reducing the burden of the debts on the company by decreasing the rates paid and increasing the time the company has to pay the obligation back. This allows a company to increase its ability to meet the obligations. Also, some of the debt may be forgiven by creditors in exchange for an equity position in the company. The need for a corporate debt restructuring often arises when a company is going through financial hardship and is having difficulty in meeting its obligations. If the troubles are enough to pose a high risk of the company going bankrupt, it can negotiate with its creditors to reduce these burdens and increase its chances of avoiding bankruptcy.
(Source : Investopedia)
Scroll right to read this interesting restructuring case on Kodak.
Up Next:
In the next chapter we discuss the Vodafone- Idea merger and the significance of Due Diligence in Finance.
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