什么是债务重组？

What is debt restructuring?

Debt restructuring is a process used by companies, individuals and even countries to avoid the risk of default, such as by negotiating lower interest rates. When a debtor faces financial distress, debt restructuring offers a cheaper alternative to bankruptcy and can be beneficial to both borrowers and lenders.

Main points

• Debt restructuring applies to companies, individuals and countries.
• Debt restructuring can reduce loan interest rates or extend repayment terms.
• Debt restructuring may include debt-for-equity swaps, where creditors agree to cancel some or all of their outstanding debt in exchange for equity in the company.
• A country seeking debt restructuring may transfer debt from the private sector to public sector institutions.

How debt restructuring works

Some companies seek debt restructuring before facing bankruptcy. The debt restructuring process typically involves getting lenders to agree to lower interest rates on loans, extend the maturity dates on a company's liabilities, or both. These steps improve the company's chances of repaying its debt and remaining a going concern. Creditors understand that they will suffer greater losses if the company is forced into bankruptcy or liquidation.

Debt restructuring can be a win-win for both parties, as the business avoids bankruptcy and lenders often receive more than they would recover in a bankruptcy proceeding.

This process works similarly for individuals and countries, albeit at very different scales.

IMPORTANT NOTE: Individuals looking to restructure their debt can hire a debt relief company to assist with negotiations, but should make sure to work with a reputable company to avoid being scammed.

Types of debt restructuring

Businesses can use a variety of tools to restructure their debt. One of them is debt-for-equity swap. This occurs when creditors agree to cancel some or all of the outstanding debt at the expense of company equity. This exchange is often preferred when both outstanding debt and company assets are large, and forcing the business to cease operations would be counterproductive. Creditors prefer to take control of a troubled business if necessary and continue operating it.

Companies seeking to restructure their debt can also renegotiate with their bondholders for a "haircut" - meaning part of the outstanding interest payments will be written off, or part of the balance will not be repaid.

Companies often issue callable bonds to protect themselves from being unable to make interest payments. Bonds with a callable feature can be redeemed early by the issuer when interest rates fall. This enables the issuer to restructure debt in the future as existing debt can be replaced with new debt at a lower interest rate.

In rare cases, a company may issue revenue bonds, which promise to repay only principal without paying interest or dividends.

Countries may face defaults on their sovereign debt, as they have done frequently throughout history. In modern times, some countries have chosen to restructure their debt with bondholders. This could mean shifting debt from the private sector to public sector institutions that are better able to withstand the impact of a state default.

Sovereign creditors may also be required to accept a haircut, agreeing to accept debt repayments at a reduced rate, perhaps 25% of the full value of the bonds. The maturity date of a bond can also be extended, giving the government issuer more time to raise funds to repay bondholders.

Unfortunately, such debt restructurings are poorly monitored internationally, even as restructuring efforts cross national borders.

Individuals facing bankruptcy can try to renegotiate terms with creditors and tax authorities. For example, an individual who is unable to continue repaying a $250,000 mortgage may reach an agreement with the lender to reduce the mortgage to 75$187,500 (75% x 250,000 = 187,500). In return, the lender may receive 40% of the property sale proceeds when the mortgagor sells the property.

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