Restructuring

Restructuring can take several forms. Financial restructuring changes a company's debts and capital, for example by renegotiating loans, extending repayment dates, swapping debt for equity or raising new money. Operational restructuring changes how the business works, such as closing facilities, cutting jobs, selling divisions or changing business processes. Organisational restructuring changes the management structure.

Companies restructure for various reasons. A struggling company with too much debt might restructure to avoid insolvency. A healthy company might restructure to adapt to changing markets, technology or competition.

For example, a retailer facing falling sales and heavy debt might close unprofitable stores, sell its online division and agree with lenders to convert part of its debt into shares, reducing its interest payments.

Restructuring can be carried out informally, through negotiation with lenders and stakeholders, or formally, through court-supervised processes such as Chapter 11 in the United States or restructuring plans and administration in the United Kingdom. Restructuring often involves difficult choices, including job losses and losses for shareholders and creditors, but can allow a viable business to survive.