Corporate distress, troubled debt restructurings and equity stripping

Abstract

Purpose The focus on excessive corporate leverage as a key factor influencing bank loan delinquency has come into sharp focus in recent times. However, not much analysis has been undertaken on the factors driving corporate distress in emerging economies. Focusing on India as a case study, the purpose of this paper is to investigate the impact of a particular category of corporate debt restructuring (CDR) proposed by the Indian central bank over the last decade in leading an attempt to address bank loan delinquencies, the authors assess the factors influencing the quantum of restructured debt at the corporate level over the time period 2003–2012. Design/methodology/approach Besides univariate analysis, the authors use logit regression techniques to analyze the factors driving CDR outcomes in India. Findings The results suggest that firms that successfully exit the debt restructuring process are more profitable and less levered and spend a longer time in such restructuring. Little net equity enters these restructured firms, while there is some evidence of equity stripping, particularly in firms with greater promoter control. Originality/value To the best of our knowledge, this is one of the early studies that employ micro-level data to make a comprehensive assessment of the factors driving CDR for a leading emerging economy.

Scoring the financial distress and the financial statement fraud of Garuda Indonesia with «DDCC» as the financial solutions

“…Debt restructuring, company must propose to the bank and the other creditors process of debt rescheduling, debt refinancing and debt discounting in order to prevent insolvency and or bankruptcy. Result from Ghosh (2019) when analyzing corporate debt restructurings in India as the emerging country, he found that firms which have successfully exit debt restructuring are more profitable, less levered, and spend longer time in restructuring process. Actually GIAA can follow the nearer sister company, PT Krakatau Steel Persero Tbk (KRAS) which is on processing the loan restructuring that was start in 2019, The CEO Mr. Silmy Karim said recently to the news (Kompas, 2020) “If able to accomplish, this is the biggest debt restructuring in the history of Indonesia.” But all of the restructuring process need patience and time to reveal, thus the government must set long-term time setting for this.…”

“…, flight utilization, service excellence, customer experience, revenue diversification, support between government companies, and others internal or external supports, but we are not talking about organizational and operational things, we're talking about finance things which I've depicted into « DDCC » as the 4 financial solutions Figure1:(1) Debt restructuring, company must propose to the bank and the other creditors process of debt rescheduling, debt refinancing and debt discounting in order to prevent insolvency and or bankruptcy. Result fromGhosh (2019) when analyzing corporate debt restructurings in India as the emerging country, he found that firms which have successfully exit debt restructuring are more profitable, less levered, and spend longer time in restructuring process. Actually GIAA can follow the nearer sister company, PT Krakatau Steel Persero Tbk (KRAS) which is on processing the loan restructuring that was start in 2019, The CEO Mr. Silmy Karim said recently to the news (Kompas, 2020) "If able to accomplish, this is the biggest debt restructuring in the history of Indonesia."…”

Debt Restructuring and Financial Performance SOEs in Indonesia

“…(B. N. state that debt restructuring is a way to avoid company liquidation through an agreement with creditors with certain conditions. Meanwhile, according to (Ghosh, 2019) is an adjustment or rearrangement of the debt structure that reflects an agreement with the debtor to plan for the fulfillment of its financial obligations. The purpose of debt restructuring is to provide support in the form of leeway for companies that are experiencing financial difficulties so that they can get out of these problems within a certain period (Cheng, 2015).…”

Pengaruh Restrukturisasi Utang RDI/SLA pada Likuiditas, Struktur Modal, dan Kinerja Keuangan BUMN

“…Restrukturisasi adalah perubahan model bisnis, kepemilikan, struktur aset atau struktur modal suatu perusahaan agar dapat terus mencapai tujuannya (Silva & Saito, 2018). Restrukturisasi juga sebagai cara untuk menghindari likuidasi atau tuntutan pailit oleh kreditur dengan menyepakati syarat tertentu yang dikenal dengan restrukturisasi utang (Ghosh, 2019;Greenwood et al, 2020). Berbagai bentuk skema restrukturisasi utang antara lain renegosiasi utang dan rescheduling utang (Tedeschi et al, 2021), debt to asset swap (Kang, 2020), dan debt to equity swap (Cepec & Grajzl, 2020).…”