process of restating company assets to reflect current market value and restating the financial structure downward to reflect reductions on the asset side of the balance sheet. A financially troubled firm usually goes through reorganization. Under a reorganization, the firm continues in existence. Chapter 11 of the bankruptcy law provides for reorganization. Chapter 7 provides for liquidation.
- restructuring of a corporation’s financial assets under Chapter 11 of the Bankruptcy Code to return the company to profitability. The debtor corporation, known as the debtor in possession if no bankruptcy trustee is named, remains in operation and attempts to work out a plan for repayment of debts under supervision of the Bankruptcy Court. Creditors are prevented from seizing assets of the debtor to satisfy their claims, and must agree to a reorganization plan submitted by the debtor. If no acceptable plan can be worked out, the corporation’s assets can then be liquidated, or sold off, to meet its unpaid obligations. Any corporation other than a bank or an insurance company, or a municipal government, may file a bankruptcy petition under Chapter 11. cram downSee also creditors’ committee involuntary bankruptcy.
- combination of two or more related business organizations, resulting in a new corporate structure, but leaving the business units intact. For example, two subsidiary banks of a bank holding company can merge into a single bank. The transaction is similar to a pooling of interests.
Law: financial restructuring of a firm after it has filed for protection from creditors while it works out a plan to repay its overdue debt. Company reorganizations usually take place under Chapter 11 of the federal bankruptcy code under the supervision of a bankruptcy court. If the plan does not restore the company’s health, the company may be liquidated and its assets sold to pay off the claims of creditors and shareholders.
Management: changing lines of authority, organization chart, and so on to improve the management structure of a company.
financial restructuring of a firm in bankruptcy