Debt and Equity Restructuring

A method used by companies with outstanding debt obligations to alter the terms of the debt agreements in order to achieve some advantage. Companies use debt restructuring to avoid default on existing debt or to take advantage of a lower interest rate. A company will often issue callable bonds to allow them to readily restructure debt in the future. The existing debt is called and then replaced with new debt at a lower interest rate. Companies can also restructure their debt by altering the terms and provisions of the existing debt issue.

Our approach on delivering the debt restructuring services to our clients is based on a debt capacity valuation and gathered feedback from banks prior to implementing a specifically tailored restructuring plan designed to address the client's financial problems. If it is required from us, we are able to work closely with legal experts, financial professionals and international advisories in order to successfully implement a restructuring plan project and reach a credible financial structure for each of our clients.

Our teams are able to draw an accurate forecast that is able to reflect our client's future financial performance. Resolving debt problems in a timely manner would have tremendous impact on company's future performance.

The Advantages and Disadvantages of Debt and Equity Financing:

Equity Financing:

You may have some cash you want to put into the business yourself, so that will be your initial base. Maybe you also have family or friends who are interested in your business idea and they would like to invest in your business.

Advantages of Equity Financing:

You can use your cash and that of your investors and get underway without the burden of debt on your back.
If you have prepared a prospectus for your investors and explained to them that their money is at risk in your business, they will understand that if your business fails, they will not get their money back.
Investors may offer valuable business assistance that you may not have.

Disadvantages of Equity Financing:

Investors do expect a share of the profits where, if you obtain debt financing, banks or individuals only expect their loans repaid.
Since your investors own a piece of your business, you are expected to act in their best interests as well as your own, or you could open yourself up to a lawsuit.

Debt Financing:

If you decide that you do not want to take on investors and want total control of the business yourself, you may want to pursue debt financing in order to start up your business. You will probably try to tap your own sources of funds first by using personal loans, home equity loans, and even credit cards. Perhaps family or friends would be willing to loan you the necessary funds at lower interest rates and better repayment terms. Applying for a business loan is another option.

Advantages of Debt Financing

Debt financing allows you to have control of your own destiny regarding your business. You do not have investors or partners to answer to and you can make all the decisions. You own all the profit you make.
If you finance your business using debt, the interest you repay on your loan is tax-deductible. This means that it shields part of your business income from taxes and lowers your tax liability every year. Your interest is usually based on the prime interest rate.
The lenders from whom you borrow money do not share in your profits. All you have to do is make your loan payments in a timely manner.
You can apply for a Small Business Administration loan that has more favorable terms for small businesses than traditional commercial bank loans.

Disadvantages of Debt Financing

You may have large loan payments at precisely the time you need funds for start-up costs. If you don't make loan payments on time to credit cards or commercial banks, you can ruin your credit rating and make borrowing in the future difficult or impossible.
Commercial banks may require you to pledge your personal assets before they will give you a loan. If your business goes under, you will lose your personal assets.
Any time you use debt financing, you are running the risk of bankruptcy. The more debt financing you use, the higher the risk of bankruptcy.
Even if you incorporate, most financial institutions will still require business to pledge business or personal assets as collateral for your business loans. You can still lose your personal assets.

Debt/Equity Ratio

A high debt/equity ratio generally means that a company has been aggressive in financing its growth with debt. This can result in volatile earnings as a result of the additional interest expense.

If a lot of debt is used to finance increased operations (high debt to equity), the company could potentially generate more earnings than it would have without this outside financing. If this were to increase earnings by a greater amount than the debt cost (interest), then the shareholders benefit as more earnings are being spread among the same amount of shareholders. However, the cost of this debt financing may outweigh the return that the company generates on the debt through investment and business activities and become too much for the company to handle. This can lead to bankruptcy, which would leave shareholders with nothing.

The debt/equity ratio also depends on the industry in which the company operates. For example, capital-intensive industries such as auto manufacturing tend to have a debt/equity ratio above 2, while personal computer companies have a debt/equity of under 0.5

(Optimal debt-to-equity ratio depends on your overall financial situation, goals, employment security, risk aversion, tax implications, etc. Comfort level and other emotional 'sleep at night' factors do play a role in answers to this question, as well as the tax implications, and one's view of the time value of money. At the macro level, since debt repayment is typically tied to income/employment, suggested ratios of debt to income range from about 1.7 (age 30), 1.0 (age 45), and taper down to 0 at age 65 or retirement age)

Financial transactions of this kind that I M&A could arrange

Bank credit based on your funds, on the credit history and the assets of your company or private person, focusing on your borrowing capacity of the individual or business entity, for specific purposes, rather than general purposes.

Emission of Bonds - explain the key steps and recommend the optimal issue structure, compile all contractual documentation and set all organizational and technical requirements for a successful issue of bonds, as well as prepare a management presentation with the goal to acquire an adequate amount of future bonds holders.

Emission of Bonds services - Negotiating with regulators of financial markets and coordinating legal advisers; Emission conditions and emission prospectus preparation; Support during the emission approval process undertaken by the statutory organ; Setting conditions of emission administration; Negotiating with BCPP or RM-S and preparing quotation documentation)

IPO (Initial Public Offering)

Corporate Finance services within IPO:

Advisory during assessment of a required volume of capital;
Design of issue structure - participation on development of overall issue strategy;
Choice of markets and coordination of issue placement among investors;
Leading and supporting the transaction team;
Assistance with a choice of other advisors (lawyers, tax advisors, auditors, etc.);
Company valuation for issue purposes;
Preparation of prospectus in cooperation with lawyers and overall advisory to your company;

Reasons for IPO:

Obtaining an interest-free capital;
Freedom of using the acquired capital;
Increase of shareholders´ capital (equity);
Possible sale of part of the owners´ stock;
Publicity, prestige and overall improvement of transparency.

Private placement sales of securities to a relatively small number of select investors as a way of raising capital. Investors involved in private placements are usually large banks, mutual funds, insurance companies and pension funds. Private placement is the opposite of a public issue, in which securities are made available for sale on the open market.