Forms and sources of financial reorganization
Remediation - a set of measures aimed at the enterprise out of the crisis, restoring its profitability and competitiveness. Financial reorganization provides cover operating losses, restore solvency, debt reduction to normal levels, the formation of sufficient financial resources for the stable operation of the business. Implementation of the reorganization involves quite a wide range of measures to improve the financial condition of the company.
In-depth analysis of complex operational, financial and investment company allows evaluating prospects, internal resources mobilization of financial resources, the possibility of attracting investors and achieving profitability in the future. This is a prerequisite for choosing the most effective measures to restore the solvency of the debtor's reorganization and development program.
Sanitation program covers the following topics:
1) the purpose of reorganization;
2) reorganization strategy;
3) reorganization project;
4) reorganization plan;
5) implementation management reorganization program.
The objectives of reorganization can be divided into strategic and tactical. By tactical include: restore solvency, liquidation of debt for claims. Strategic objectives - to stabilize and strengthen the financial condition of the company, restoring its competitive position.
Sanitation strategy determines its ideology and mechanisms for implementation. It has character and is determined Variadic sanitation purposes. Focusing on short-term measures such as the sale of assets, reducing production costs and gives a quick effect, reduces the debt company, but leaves open the prospects of its development.
Another option strategies based on technical re-equipment and modernization of production, development of new products, new markets, requires a significant amount of investment that is difficult to engage in a financial crisis.
Typically, the biggest effect is the comprehensive approach to improve the financial condition of the company, that reorganization strategy, which provides the maximum combination of measures aimed at mobilizing domestic sources of savings measures to attract external financing for investment projects to strengthen the competitive position of the company.
Sanitation strategy defined interest of creditors in collaboration with the business entity, the company attractive to potential investors sanitation, technical and technological characteristics of production. It can be focused on the following areas:
- Mobilization of domestic sources of increasing financial resources for repayment of debts;
- Restructuring of the debtor;
- Recourse to external sources of financing;
- A combination of several areas.
The project includes the reorganization justify the chosen strategy and stages and forms of its implementation. Sanitation component of the project are:
1) feasibility sanitation;
2) the calculation of the volume of financial resources to achieve objectives;
3) schedules and methods of mobilizing capital;
4) The terms of the investment of payback;
5) evaluate the effectiveness of sanation measures;
6) the projected results of the project.
Specifies the program reorganization plan for its implementation. In the reorganization plan provides measures to restore the solvency dates restore solvency conditions to attract investors, investor terms of responsibility for failure to perform its obligations of creditors. Rehabilitation plan developed in the form of a business plan as a resort, and the debtor.
Remediation Company may provide its restructuring, ie implementation of organizational and economic, financial, economic, legal and technical measures to reorganize the company, changing its management structure, ownership, organizational and legal form that will facilitate the financial recovery of the company.
As a result of these changes create viable business entities that can operate effectively in a competitive environment.
Each of these forms of restructuring has its advantages, disadvantages and conditions of implementation.
The criteria for the selection of a form may be:
- Terms of return on investment;
- Increasing the rate of return;
- The adequacy of the funds received for the repayment of debts;
- Timing of development of new products or new areas.
Restructuring of public enterprises, as a rule, because of their privatization. In this case, changing organizational and legal form of the company, founders. As a result of improved capital structure, new opportunities for attracting investment and introducing other quality management. State-owned enterprises during the reorganization can be leased workforce.
Plan of reorganization may provide for the sale of the debtor's property or the entire property complex at public auction or otherwise. Funds from the sale are used to repay debt. This form of restructuring applies generally to non-state enterprises. Ownership of the debtor's property investors can get involved in curative treatments.
Combining or merging companies should not contradict antimonopoly legislation and requires the consent of the founders. This form of restructuring is typical for companies that technically related, or have the same specialization can share infrastructure and so on.
Making sanation activities due to the justification funding. Investors this process can be both physical and legal persons.
The sources of repayment uncovered losses of the debtor is back, insurance funds, funds of purpose, retained earnings, profit curative.
Practical implementation of internal reserves of cash flow is primarily concerned with the introduction of a set of measures of organizational, technical, economic and managerial nature that provided business plan. The feature of the implementation of these measures is that they do not require significant investment.
Effective curative tool, a way of lending reorganization may make the bond conversion loans. They exchanged for shares of the company and have a number of advantages over the issue of shares or loans, namely conversion of interest on the bonds are lower than the interest rate on the credit market.
Grants, preferential loans provided by the state, usually state-owned enterprises experiencing financial crisis.
The owners of the debtor, its staff are also involved in sanation activities by providing loans, contributions to the increase of share capital, including through the purchase of shares, granting non-repayable aid.
The participation of banks in financing activities sanation of the debtor defined risk and interest in further cooperation with him. In this regard, lenders can provide curative enterprise loans to restructure the debt or reduce its volume by a write-down.
Implementation of measures to reorganization of the debtor if successful removes it from the financial crisis and create conditions for conducting business activities in the future. If financial reorganization goals are not achieved, the company declared bankruptcy and liquidation procedure begins.