Term of the Day: Corporate Refinancing

15. 10. 2008

TERM OF THE DAY - OCTOBER 15, 2008

What Does it Mean?
The process through which a company reorganizes its debt obligations by replacing or restructuring existing debts. Refinancing may also involve issuing equity to pay off a percentage of debt.

Debt is replaced or refunded by a company with money that is raised by issuing or creating other borrowing. In restructuring, a company works with its creditor to change the terms of a loan; these terms can include the reduction of interest rates, the improvement of covenants or the extension of the loan's terms.

Investopedia Says...
Corporate refinancing will often come about if a company is unable to meet its current obligations and needs to restructure the terms of its existing debt arrangement. This usually involves lowering the interest rate and extending the time to maturity... Read more.

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Related Terms

Bond
A debt investment in which an investor loans money to an entity... Read more.

Chapter 11
Named after the U.S. bankruptcy code 11... Read more.

Debt Restructuring
A method used by companies with outstanding debt obligations... Read more.

Refinance Wave
A situation where a large amount of mortgage refinancing occurs... Read more.

Refunding
Retiring an outstanding bond issue at maturity by using money from the sale... Read more.

Related Links

Debt Reckoning - Learn about debt ratios and how to use them to assess a company's financial health. You could save a lot of money! Read more.

When Companies Borrow Money - Here we explain how to evaluate whether a company's debt will pose a threat to investors. Read more.

When would a corporation want to refinance its debt? - Read more.