1. Corporate Debt Restructuring

2. CORPORATE RESTRUCTURING

3. MEANING
“The process involved in changing the organisation of a business.”
Redesigning one or more aspects
Implemented due to certain factors:
To be more profitable, survive economic conditions, address challenges & increase shareholders value.

4. NEED & OBJECTIVES OF CORPORATE
To improve competitive position
To rearrange the activities to be more profitable
Cost reduction
Utilisation of strategic assets
Eliminate competitors
To have an access to R & D
Focus on core strengths

5. Revive and rehabilitate a sick unit
Constant supply of resources
Tax benefits
Improve corporate performance

6. BROAD AREAS FINANCIAL RESTRUCTURING OPERATIONAL MANAGERIAL ASSET
Reduction of capital, reorganising the equity and debt base, buy back of shares.
Product restructuring
Market restructuring
Improving the manpower
New investments, technological changes, asset reduction, sale and lease back transactions.

7. TECHNIQUES EXPANSION / GROWTH TECHNIQUES CONTRACTION / DIVESTMENT
OTHER
Mergers
Takeover/ Acquisition
Strategic Alliance
Joint Venture
Franchising
Licensing
Wholly owned Subsidiaries
Demerger / Spin off
Disinvestment
Slump Sale
Buy out
Leveraged Buy out
Sell off
Reverse Merger
Debt Equity Swaps
Buyback of Shares
Asset Securitisation

9. FINANCIAL RESTRUCTURING
Restructuring is a combination of two words ‘re’ and ‘structure’ where ‘re’ means again and ‘structure’ means construct or arrange. Thus when the organization have to rearrange or rebuild its internal structure to bring more efficiency and competitiveness, it is called restructuring of the organization. MEANING OF FINANCIAL RESTRUCTURING Every company has two main sources of finance i.e. debt and equity and a successful organization always creates a perfect balance of debt and equity in its capital structure. Sometimes the capital structure may get off balance due to certain changes which are beyond the control. This balance is thus restored by financial restructuring.

10. CAUSES OF FINANCIAL RESTRUCTURING
MISAPPROPRIATION OF FUNDS
OBSOLETE
LACK OF OPTIMUM UTILISATION OF RESOURCES
SHIFT IN CONSUMER PREFERENCES
INEFFIOCIENT MANAGEMENT
EXTERNAL FACTORS
DISSATISFIED WORKERS, STRIKES,LOCK OUTS ETC

11. NEED OF FINANCIAL RESTRUCTURING
At the time of promotion and incorporation of the company.
At the time of expansion of an existing company.
At the time of amalgamation and absorption of two or more companies.
At the time of re-organization of capital of the company.

12. It is the desire of every company to have a fairly capitalized situation i.e. neither over-capitalization nor under –capitalization
The over capitalized company can be restructured by:
a)Buy back of shares
b)Redemption of preference shares
c)Reduction of funded debts
d)Reorganisation of equity capital
An under capitalization can be correctd By a)Fresh issue of shares
b)Issue of bonus shares
c)Increasing par value of shares

13. FINANCIAL RESTRUCTURING SHOULD NOT BE ENCOURAGED IN FOLLOWING CASES
TO ELIMINATE COMPETITION
TO OVER PROTECT THE COMPANY FROM COMPETITION
TO COMPENSATE THE INEFFICIENCY OF THE MANAGEMENT
TO PROTECT THE INDUSTRY AT THE COST OF QUALITY

14. STEPS IN FINANCIAL RESTRUCTURING

15. Corporate Debt Restructuring
Corporate debt restructuring helps in restructuring the existing debt obligations by delaying the repayment time or converting the debt into equity shares or reducing the rate of interest to be paid on these obligations.
This process is voluntary and non regulatory.

16. In simple words
Corporate Debt Restructuring (“CDR”) mechanism is a voluntary non statutory mechanism under which financial institutions and banks come together to restructure the debt of companies facing financial difficulties due to internal or external factors, in order to provide timely support to such companies.

17. Definition
Debt restructuring is a process that allows a private or public company, or a sovereign entity facing cash flow problems and financial distress to reduce and renegotiate its delinquent debts in order to improve or restore liquidity so that it can continue its operations.

18. Features Voluntary mechanism Non statutory process
Allows public and private companies both to restructure
Reorganizes the debt obligations
Helps in reviving the sick companies
Helps in restoring the liquidity of the companies stuck in debt trap.

20. Importance Helps the business to control their finances
Improves credibility
Help from third party

21. Satisfy creditors
Protects the company from bankruptcy
Helps in reviving a sick unit
Reduces NPA of various financial institutions

22. Improves economic condition
Alternatives to BIFR
The Board for Industrial and Financial Reconstruction (BIFR) is an agency of the government of India, part of the Department of Financial Services of the Ministry of Finance. Its objective is to determine sickness of industrial companies and to assist in reviving those that may be viable and shutting down the others.

23. CDR STRUCTURE
CDR was introduced in 2001 as a voluntary and non statutory system and is based on the system prevalent in London where the company is saved from insolvency through Debtor Creditor Agreement (DCA) and Inter Creditor Agreement(ICA)
RBI issued guidelines in 2012 to deal with both CDR as well as non-CDR

24. THREE TIER STRUCTURE CDR is implemented through three tier structure :
CDR Standing Forum and its Core Group
CDR Empowered Group
CDR Cell

25. CDR STANDING FORUM
This is the topmost layer of the CDR system and helps in smooth functioning of the Self Empowered Group.
There is also a CORE GROUP which helps in taking decisions relating to policy.
This core group is responsible for laying down guidelines and monitoring the process of CDR .

26. CDR EMPOWERED GROUP
The first layer deals with general guidelines, the next layer consists of specific cases as per guidelines of STANDING FORUM
The company will have to apply for the CDR to CDR Cell which will examine the request filed by the company
The cell will then check the feasibility of request on the basis of Standing Forum guidelines

27. CDR CELL
The CDR Cell helps CDR Standing Forum and Empowered Groups in performing functions and work out a plan within 30 days with the help of other creditors and experts.
According to the proposal final decision is taken by Empowered Group.

28. METHODS OF CDR Increasing the term of loans
Converting the debt into equity
Reducing share capital or changing its composition
Extension of repayment period of the existing debt and rescheduling
Reduction of high interest on the loan
Re-phasing recovery programs

29. 7. Reducing margins
8. Reassessing credit facilities such as working capital
9. Procuring extra money
10. Conversion of the unpaid interest
11. Conversion of the compound interest into simple interest

30. TRENDS IN CDR
The CDR progress reports indicate 285 live cases dealing with the debt of Rs crores
Infrastructure ,Iron and Steel , textiles etc. are some of the main sectors which are resorting to CDR mechanism
Therefore CDR in India has shown higher trend and its demand has been increasing since its inception