Financial Distress参考.ppt

Executive Summary This chapter discusses financial distress, private workouts, and bankruptcy. A firm that defaults on a required payment may be forced to liquidate its assets. More often, a defaulting firm will reorganize. Financial restructuring involves replacing old financial claims with new ones and takes place with private workouts or legal bankruptcy. Chapter Outline 31.1 What is Financial Distress? 31.2 What Happens in Financial Distress? 31.3 Bankruptcy Liquidation and Reorganization 31.4 Private Workout or Bankruptcy: Which is Best? 31.5 Prepackaged Bankruptcy 31.6 Summary and Conclusions 31.1 What is Financial Distress? A situation where a firm’s operating cash flows are not sufficient to satisfy current obligations and the firm is forced to take corrective action. Financial distress may lead a firm to default on a contract, and it may involve financial restructuring between the firm, its creditors, and its equity investors. Insolvency Stock-base insolvency; the value of the firm’s assets is less than the value of the debt. Insolvency Flow-base insolvency occurs when the firms cash flows are insufficient to cover contractually required payments. The Largest U.S. Bankruptcies 31.2 What Happens in Financial Distress? Financial distress does not usually result in the firm’s death. Firms deal with distress by Selling major assets. Merging with another firm. Reducing capital spending and research and development. Issuing new securities. Negotiating with banks and other creditors. Exchanging debt for equity. Filing for bankruptcy. What Happens in Financial Distress Responses to Financial Distress Think of the two sides of the balance sheet. Asset Restructuring: Selling major assets. Merging with another firm. Reducing capital spending and RD spending. Financial Restructuring: Issuing new securities. Negotiating with banks and other creditors. Exchanging debt for equity. Filing for bankruptcy. 31.3 Bankruptcy Liquidation and Reorganization Firms that cannot mee