What is Financial Restructuring?
Financial restructuring is the process of reorganizing a distressed business’s capital structure by renegotiating debt, raising new equity, divesting assets, or combining these measures, with the aim of restoring solvency and operational viability.
How It Works
- Diagnosis: independent business review and 13-week cash flow.
- Stakeholder engagement: lenders, shareholders, employees, key customers.
- Plan: debt rescheduling, haircuts, debt-for-equity swaps, new capital injections.
- Implementation: amended facility agreements, shareholder approvals, court orders if needed.
Saudi Context
Under the Saudi Bankruptcy Law (2018), financially distressed companies can pursue Preventive Settlement (early-stage, no court control) or Financial Restructuring (court-supervised, binding on creditors). The Bankruptcy Commission oversees the process and approves licensed trustees and experts to manage the restructuring plan.
Example
A Saudi construction company with SAR 100,000,000 in bank debt files for court-supervised Financial Restructuring under the Saudi Bankruptcy Law, negotiates a 20% haircut and 5-year rescheduling, and injects SAR 25,000,000 in fresh shareholder equity.