Debt situations that can be resolved through business-to-business debt mediation include: lawsuits and judgments, defaulting property, machinery, capital leases and leases, commercial loans or mortgages on commercial property, principal payments for improvements/constructions, invoices and settlements, disputed invoices and problematic debts. Debt restructuring in Italy can be carried out either amicably (ex-Article 167 of the Italian Bankruptcy Code) if a waiver or simple restructuring of the debt is required, or through a debt restructuring agreement negotiated by the court (ex Article 182/bis of the Italian Bankruptcy Code) and may provide for partial debt relief, a mandatory recapitalisation of the debtor. or for the liquidation of the assets of certain debtors for the repayment of preferred creditors. A company often issues bonds payable to protect itself from a situation where interest payments cannot be made. A bond with a required characteristic may be repaid prematurely by the issuer during a period of lower interest rates. This allows the issuer to restructure the debt in the future, as existing debt can be replaced with new debt at a lower interest rate. An exchange of debt for shares can also be described as a “bondholder discount”. Bondholder discounts in major banks have been advocated by prominent economists as a possible solution to the subprime mortgage crisis: even if Greece did not leave Euroland, economists and financial analysts say it would not be the end of the European debt crisis. Negotiations are to take place with Spain and Italy. Both are above the cliff – but demand better conditions than those offered to Greece. In Gilson`s (1990) study of 61 companies declaring bankruptcy, on average 80% of the common shares of the reorganized company are distributed to creditors. Distributing shares in exchange for receivables before the application can often result in a change of control.
The federal and state legislatures give U.S. banks the power to hold common stock they received as part of the credit restructuring. For three-quarters of the 111 financially distressed firms in Gilson`s (1990) sample, bank lenders and other creditors receive significant voting blocks in the restructured company. Banks receive an average of 36% of the company`s common shares and often appoint representatives to the board of directors. James (1995) examines 102 non-performing bank debt restructurings and finds that banks take equity positions in 31% of transactions. In addition, banks generally hold a significant stake at least two years after restructuring. Countries can face the default of their sovereign debt, and this has been the case throughout history. Nowadays, some countries choose to restructure their debts to bondholders. This may mean the transfer of debt from the private sector to public sector institutions that might be better able to cope with the effects of a country`s default. Foreign currency rank is defined as the priority that a receivable holder has over other receivable holders when the entity`s cash flows are insufficient to meet all obligations.
Seniority can be important in the event of liquidation or bankruptcy, but it is also relevant in the event that a debt restructuring takes place, as it defines disbursements in a state of no-deal. Note that the maturity of the debt implies some form of seniority. This is because short-term debt is essentially higher than long-term debt due to the fact that it is paid earlier. In this section, we deal with seniority in the narrow sense, i.e. the priority structure of claims due at a given time. We refer to section 6.2 on the structure of deadlines, the discussion of the more general question of the combination of seniority and the structure of deadlines. Promoting debt restructuring and settlement Several experts believe that Greece will default on its debt after insufficient reduction of the overall debt and the absence of an economic resurgence. In addition, the second aid plan has placed the country in an unsustainable debt situation. There is a difference between accepting financing terms for the 12th hour and returning to growth potential. If the key issue is bank solvency, converting debt into equity via bondholder discounts is an elegant solution to the problem. Not only is the debt reduced with interest payments, but at the same time the equity is increased. Investors can then have more confidence that the bank (and the wider financial system) is solvent, which helps unlock credit markets.
Taxpayers do not have to contribute money, and the government may only be able to provide short-term guarantees to build confidence in the recapitalized institution. For example, Wells Fargo owed its bondholders $267 billion, according to its 2008 annual report. [5] A 20% discount would reduce this debt by approximately $54 billion, creating an equal amount of equity, thereby significantly recapitalizing the bank. Debt restructuring can be a win-win situation for both companies, as the company avoids bankruptcy and lenders typically receive more than they would receive in bankruptcy proceedings. .
