How Does Corporate Debt Restructuring Work?

Posted by aniket vichare on February 23rd, 2018

Corporate Debt Restructuring basically amounts to a total overhaul of the debts that are borne by a corporate which may involve in the alteration of the repayment period, the amount to be repaid, the amount of installment present and the rate of interest.

There are several instances where corporates face financial crunch due to various seen or unforeseen factors. If such a situation arises, it calls for a safety net for the money that has been lent. This calls for solution known as Corporate Debt Restructuring (CDR).

In order to implement CDR, a company must provide an assurance that it has some assets to support the reconstructing process as once the company gets entangled into liquidation, it cannot withdraw back. Liquidation of an organization causes the company to seize any and every operation and the company loses its individual legal entity status.

In order to overcome such crisis, proper restructuring is a must so that the company may get a renewed breath of life in its business operations. CDR is a lifesaver in such matters. CDR can convert preferred shares into equity shares. CDR encompasses various stages such as deciding agreement proposal between both parties, considering proposals between the parties, distributing additional funds to the company in return for a higher interest rate.

CDR also enables to convert overall debts into shares and simultaneously a part of the debt can be waived off by the creditors to let off steam from the company. Long and short is that the main objective of a CDR is to maintain the sustainability of the company in the long run so that the investors do not bear huge losses.

The conceptualization of CDR was done in the year 2001. RBI bought into certain rules and regulations with regards to guidelines that need to be followed by the bank and financial institutes. Following these guidelines to the core is JM Finance, a firm located in Mumbai, has a team of experts who are engaged in the dealings of attaining assets that do not perform well financially and endeavour and find ways to resolve problems and convert it into a valuable asset. JM Financial Asset Reconstruction Company applies meticulous tactic to acquire the assets by applying procurement structures for organisations that are distraught and are spread across any topography.