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ABOUT Debt Restructuring

A process which allows modification in the terms of a loan, due to financial distress faced by the borrower by renegotiating its debts to prevent it from going bankrupt. The process involves negotiation regarding reduction in debt or alteration in repayment plans.

Restructuring usually takes place when there is danger of bankruptcy of the borrower.

The restructuring may involve extending the period of repayment, reducing the total amount owed, or exchanging a portion of the debt for equity in the debtor company.

From cost point of view it is better to both the parties viz the client gets a significant discount or a more flexible repayment schedule and for the bank it is less expensive than what a bankruptcy would have been.


Any private or public company or a sovereign entity facing cash flow problems in repaying the debts borrowed can apply for debt restructuring to renegotiate its debts in order to restore liquidity for enabling continuation of its operations.

Required Documents

The documents needed vary from case to case. Let FINMART understand your needs and assist you in documents requirement.


Refinancing means replacement of the old debt with a new debt without financial crisis being the reason.

Restructuring means making modification in the terms of loan due to financial distress faced by the client.
  1. The borrower has defaulted on debt obligations.
  2. The borrower has declared or is on the verge of declaring bankruptcy.
  3. The borrower’s cash flows are not sufficient enough to pay off the debts.(estimates are based upon actual or projected performances).
  1. Lowering of effective interest rates.
  2. Waiver in interest or the principal amount.
  3. Modification or extension in theĀ  terms of repayment.
  4. Waiver of the financial pledge to enhance the cash flow.
Restructure of a debt to avoid default involves the use of the power of the firm against that of the lenders. If the lenders (banks/other creditors) are convinced about the inability to repay their debt, they usually support for restructure. So convincing is an integral part for restructure and reschedule. Approach towards the lenders should be with a detailed plan stating necessary corporate financial reforms to ensure transparency that the financial prospects of the company would improve. Risk of default becomes much slimmer when there are supportive lenders. The chances of resistance from the lenders tend to narrow down after certain time because everyone wants their money back in the long run.
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