Difference Between Restructuring & Refinancing
Restructuring and refinancing are very different corporate activities. Restructuring involves change, while refinancing involves replacement. Both are strategic maneuvers that don't necessarily mean a company is having difficulties.
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Restructuring
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When a company goes through major changes in the way it does business, operates and is funded, it is said to be going through a restructuring.
Refinancing
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When a company buys back its debt using money raised through issuing other debt or exchanging equity, it is said to be going through a refinancing.
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Significance
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When interest rates decline, companies often refinance in order to lower their debt payments on higher coupon bonds. When their stock price rises, they may issue stock and use the money to retire their debt early.
Effects
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Restructuring creates a very different company. It may be as simple as installing an enterprise computer system to optimize operations or it may be a total change in product line, production, marketing and management.
Time Frame
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Refinancing normally takes a relatively short time because it is simply a replacement of one type of financing for another. Restructuring can take months and even years because it is a change in the way things are done.
Considerations
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Restructuring a company may require the refinancing of debt, but refinancing does not always mean there is a restructuring in process.
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