What is Financial Restructuring?
Financial restructuring is a strategic process carried out to reorganize a company's financial structure, reduce debt burden, improve cash flow, and increase operational efficiency. This process helps companies overcome financial difficulties and achieve sustainable growth.
Types of Financial Restructuring
Companies can use different restructuring methods according to their financial situation:
Debt Restructuring
- Extension of debt maturities
- Renegotiation of interest rates
- Deferral of principal payments
- Write-off of portion of debts
Capital Structure Changes
- New capital increase
- Conversion of debts to equity
- Reorganization of partnership structure
- Finding strategic investor
Financial Restructuring Process
A successful financial restructuring process includes the following stages:
1. Situation Analysis
- Detailed review of financial statements
- Cash flow analysis
- Evaluation of debt structure
- Review of operational performance
2. Strategic Planning
- Setting objectives
- Evaluating options
- Risk analysis
- Preparation of implementation plan
Debt Restructuring Methods
Main methods used in debt restructuring process:
- Maturity Extension: Spreading debt payments over longer terms
- Interest Reduction: Reducing existing interest rates
- Principal Reduction: Waiving part of debt amount
- Payment Holiday: No payments for certain periods
- Hybrid Instruments: Use of debt-equity hybrid tools
Legal Processes in Financial Restructuring
Legal issues to consider in financial restructuring process:
- Contract renegotiations
- Creditor rights and protection
- Shareholder approval requirements
- Obtaining regulatory approvals
- Assessment of tax consequences
Success Factors
Critical factors for successful financial restructuring:
- Gaining support from all stakeholders
- Preparing realistic and feasible plans
- Making operational improvements
- Ensuring transparency and communication
- Continuous monitoring and evaluation
Post-Restructuring Monitoring
What needs to be done after financial restructuring:
- Regular tracking of financial performance
- Strengthening cash flow management
- Establishing risk management systems
- Maintaining stakeholder relationships
- Continuous improvement efforts
Tax Considerations
Tax issues to consider in financial restructuring process:
- Income tax from debt forgiveness
- Transfer pricing rules
- Corporate tax liability changes
- VAT and other indirect taxes
- Benefiting from tax advantages
Our Legal Consultancy Services
As Cebeci Law Firm, our services in financial restructuring:
- Developing financial restructuring strategy
- Debt restructuring negotiations
- Contract preparation and revision
- Negotiation processes with creditors
- Applications for regulatory approvals
- Legal risk analysis and management
