Financial Restructuring
Corporate financial restructuring
Financial restructuring is one of the most important methods of corporate restructuring, especially when a business is facing financial difficulties. This is a process of comprehensively changing the capital structure.,
Financial situation analysis
Steps for analyzing a financial situation:
- Financial statement analysis:
- Analyzing the balance sheet to assess the structure of assets and liabilities.
- Analyze the income statement to evaluate revenue, expenses, and profits.
- Analyze the cash flow statement to assess the ability to generate cash flow.
- Calculate and analyze financial ratios:
- Liquidity ratio (Current and quick ratio)
- Capital structure ratios (Debt/total assets ratio, debt/equity ratio)
- Operational efficiency indicators (Inventory turnover, accounts receivable turnover)
- Profitability indicators (ROA, ROE, ROS)
- Identify the financial problems:
- Identifying weaknesses in the financial structure.
- Identify the root causes of financial problems.
Debt restructuring plan
Restructuring options
Regarding debt to banks and credit institutions:
- Extend the repayment period (restructure the loan term)
- Lowering interest rates, waiving/reducing a portion of the principal or interest.
- Debt-to-equity swap
- Borrowing new funds to pay off old debt (refinancing)
Regarding trade and supplier debt:
- Negotiating an extension of the payment deadline.
- Payment in installments
- Propose payment in kind/services instead of cash.
- Negotiate debt reduction if a portion is paid immediately.
Things to note when restructuring debt:
- A detailed and feasible financial plan is needed.
- Ensure transparency in the financial information provided to creditors.
- Fulfilling commitments after reaching agreements with creditors.
Increase/decrease in charter capital
Proposed plan to increase charter capital:
- Issuing additional shares to existing shareholders (rights offering)
- Private placement to strategic partners or new investors.
- Converting debt into equity
- Issuing bonus shares from equity capital.
Option to reduce charter capital:
- Share buyback program
- Reduce the par value of the shares.
- Reduce the number of outstanding shares.
- Covering accumulated losses from charter capital.
- Comply with the regulations in Articles 112 and 113 of the 2020 Enterprise Law.
New fundraising plan
New sources of funding:
- Equity: Issuing shares, attracting strategic investors and investment funds.
- Loan capital: Borrow from banks, issue corporate bonds.
- Mezzanine capital: Convertible bonds, loans that can be converted into equity.
- Funding from partners: Joint ventures, business partnerships, franchising
- Project funding: Seeking funding for a specific project.
Criteria for selecting a fundraising option:
- Cost of capital and funding conditions
- Impact on ownership structure and control
- Time and feasibility
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