 | This articleneeds additional citations forverification. Please helpimprove this article byadding citations to reliable sources. Unsourced material may be challenged and removed. Find sources: "Recapitalization" – news ·newspapers ·books ·scholar ·JSTOR(May 2016) (Learn how and when to remove this message) |
Recapitalization is a type of corporate reorganization involving substantial change in a company'scapital structure. Recapitalization may be motivated by a number of reasons. Usually, the large part of equity is replaced with debt or vice versa. In more complicated transactions,mezzanine financing and other hybrid securities are involved.
One example of recapitalization is aleveraged recapitalization in which the company issuesbonds to raise money and then buys back its own shares. Usually, current shareholders retain control. The reasons for such a recapitalization include:
Another example is aleveraged buyout, essentially a leveraged recapitalization initiated by an outside party. Usually, incumbent equity holders cede control. The reasons for this transaction may include:
Another example is anationalization in which the nation in which the company is headquartered buys sufficient shares of the company to obtain acontrolling interest. Usually, incumbent equity-holders lose control. The reasons for nationalization may include:
Nationalization is essentially a move by the nation of the company to acquire controlling interest in the company, either through buying majority shares with a motive to:
It can also be an attempt by the national government to rehabilitate its position financially by issuing bonds to increase public debt and meet immediate liabilities.
