LendingTree is compensated by companies on this site and this compensation may impact how and where offers appear on this site . Provides 債務重組 for debtor firms to reorganize, restructure their liabilities, and to emerge as financially viable firms. “Better terms” is what Spain’s Mariano Rajoy is asking—which is an expression of a hope rather than a vase backed by solid argument, and “hope” is not a strategy for sovereigns. What the case of Greece, Portugal, Italy, and Spain has demonstrated is that politicians can become a destabilizing force on the country’s prospects.

Debt Restructuring

Businesses may want to consider debt-for-equity swaps, bondholder haircuts, debt-for-debt swaps, and informal agreements, depending on the size and complexity of the business. The first response from creditors was to suspend debt service for two years and extend new loans to Mexico. The hope was that with renewed foreign exchange liquidity and an IMF adjustment program, the country would be able to grow into its debt. Instead, however, capital outflows and inflation continued, and investment withered, resulting in stagnant growth and an increase in external debt. A company may negotiate repayment terms, including reducing the interest rate, writing off some outstanding loans, and increasing the time to repayment.

Debt Restructuring vs. Bankruptcy

Under the Common Framework, debt treatments are initiated by the debtor country, on a case-by-case basis, with an opportunity for private creditor participation. It may include debt for equity swap, haircuts, an extended period of non-payments, and reducing interest rates. Debt To Equity SwapA debt/equity swap is an arrangement for financial restructuring in which the company’s debts get converted into stocks; this happens when the company is in a financial crisis.

What EY debt restructuring, raising capital and M&A services can do for you

That is a more affordable method and can be achieved by an agreement between the lenders and the company. A temporary hardship program could let you skip several payments or avoid certain fees. During a serious setback, or if you’re already months behind on bills, creditors may make an unusual offer to restructure your loan agreement. When your finances are stretched thin, you may have to start picking which bills to pay.

Track record of multilateral debt relief initiatives: HIPC and MDRI

A debt restructuring might include a debt-for-equity swap, in which creditors agree to cancel a portion or all of the outstanding debt in exchange for equity in the business. Our Debt Restructuring practice group has worked in the most relevant court and out-of-court workouts and debt restructurings. These creditors do not operate on the same shared principles as the Paris Club, preferring instead to pursue closed-off discussions or collect repayment through court rulings . The second step or “completion point” of HIPC requires countries to implement their PRSP for at least one year, alongside key reforms established at the decision point, to receive full debt relief. Just over half of the funding for debt relief under HIPC came from bilateral creditors, including the United States, with the remaining portion supplemented by IFIs and select private creditors. Like other multilateral debt relief efforts, creditor participation in HIPC was voluntary.