HARANAHALLI RAMASWAMY

INSTITUTE OF HIGHER EDUCATION

PRESENTATION ON
FINANCIAL DISTRESS AND RESTRUCTURING

Submitted to, Submitted by,

Mrs. Prathima V Ankitha L D
Dept. of Management Bhavani B R
HRIHE, Hassan Madhuri A M
Pooja Shree K
Vinutha C
 FINANCIAL DISTRESS
Financial distress is a condition in which a company or
individual cannot generate revenue or income because it is
unable to meet or cannot pay its financial obligations. This
is generally due to high fixed costs, illiquid assets, or
revenues sensitive to economic downturns.
INDICATORS OF FINANCIAL DISTRESS
1. Poor profits
2. Poor sales growth or decline
3. Poor quality of products and services
4. Negative cash flow
5. Slow paying customers
6. Declining relationship with the bank
7. Borrowing to cover shortfalls
Financial Restructuring
Financial restructuring is the process of reshuffling
or reorganizing the financial structure, which
primarily comprises of equity capital and debt capital.
Financial restructuring can be done because of either
compulsion or as part of the financial strategy of the
company.

The two components of financial restructuring are;

Debt Restructuring
Equity Restructuring
INDICATORS OF FINANCIAL RESTRUCTURING
Poor competitiveness
Growth is stagnating
Dramatic revenue drop
Cash-flow shortages
Lacking responsiveness
Poor efficiency
CAUSES AND EFFECTS OF FINANCIAL
DISTRESS
 Management challenges
 Inadequate skills or ability
 Weak budget development practice
 Lack of innovation and adoptability
 Poor performance
 Poor task related communication
 Ineffective management information system
CORPORATE DEBT RESTRUCTURING
When corporate restructure its assets in such a way that it
can reduce its fixed assets, it is called corporate debt
restructuring.
FEATURES OF CORPORATE DEBT
RESTRUCTURING
 Voluntary
 Non statutory
 Done by both public and private company
 Recognize debt
 Revive sick company
OBJECTIVES

 Reduce fixed cost

 Control finance
 Reduce NPA
 Satisfy creditors
 Protection against bankruptcy
 Improve profitability
TIER SYSTEM OF CORPORATE DEBT
RESTRUCTURING
 CDR Standard forum
 CDR Empowered group
 CDR Cell
Coaping strategies
Strategy 1: Acquiring and divesting
Strategy 2: Managing cash flow
Strategy 3: Overhead optimization
Strategy 4: Enhancing revenue
Demerger (spin off / split up / split off): 
Joint Ventures: 
Buy back of Securities
A leverage buyout (LBO)
OPERATIONAL CUTBAGS

Cutbacks refer to steps taken to reduce the

amount of money being spent. If you’re coming up
short each month when it comes to paying your
costs of living, you probably need to reduce your
spending. however, taking the time to budget may
reveal some relatively painless ways to do so.
Scrutinize your expenses
Adopt tactics to keep spending in line
Tracking your progress
Alternative to cutbacks