Debt waivers, extending maturity and debt rescheduling
Debt waivers, extending maturity and debt rescheduling

The following Restructuring & Insolvency practice note provides comprehensive and up to date legal information covering:

  • Debt waivers, extending maturity and debt rescheduling
  • Rationale
  • Serious loss of share capital
  • Mechanics
  • Intercompany debts
  • Tax reliefs
  • Circumstance 1—statutory insolvency arrangement: releases
  • Circumstance 2—debt-for-equity swap: releases
  • Circumstance 3—liquidation, administration and administrative receivership: releases
  • Circumstance 4—mandatory reductions and stabilisation powers: releases
  • More...

This Practice Note covers:

  1. debt rescheduling—extending the amortisation/repayment schedule of the debt to allow the company to survive temporary financial difficulties. The aim of a debt rescheduling is to put in place a more realistic level of debt or time frame in which it can be repaid. A business which has no cash to pay suppliers or staff is unlikely to last long. Rescheduling the debt can enable the business to recover and will often increase the overall return to the lenders on their investment, as businesses tend to be worth more if they are trading well than if they are broken up

  2. debt waivers—the lender agrees to release the borrower from the obligation to repay some or all of a debt due to it. Usually, this is because the lender recognises there is little or no prospect of being repaid

Rationale

The benefit of a debt rescheduling or waiver is that it avoids the debt being accelerated or cross-defaulted into other finance agreements or layers of debt. It is frequently deployed as a first attempt to restructure a company in financial distress without using the more expensive and public restructuring processes such as administration or a scheme of arrangement. The lenders recognise the distressed position of the borrower is not a temporary one and are prepared to reschedule or waive some or all of their

Popular documents