17.7. Characteristics of Distressed Financing

Distressed financing can be executed by reorganizing the target company on the asset or liabilities side. If asset restructuring is chosen, the venture capitalist (vulture investor) has to decide which assets are kept and which are divested to recover the target company. Asset redefinition is the starting point for the restructuring plan.

Why it is convenient to recover a distressed firm? This question can be answered after reviewing the three levels of distressed financing activity:

  • The opportunity to rationalize the existing structure of the target company — Focuses on the elements that generate economic results and reduce items of the net working capital. Operations on the working capital improve ...

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