Riqueza for Consulting Solutions manages Financial Restructuring of companies

About Financial Restructuring

It is the necessary correction of the technical, economic and financial structures of the establishment, in order to enable the company to remain in operation, but to continue successfully and achieve a suitable return. This is done through a practical study of the economic and financial problems facing the establishment and the examination of the ability of the establishment to financially survive when its financial structure is balanced; the liquidity position and cash flows are reassuring; and it has the ability to settle debts and achieve a proper return on equity.

Reasons of Restructuring 

The most significant problems that affect the activity, vitality and presence of an enterprise in the business community can be summarized as follows:

- Problems related to the efficiency, good conduct, honesty and integrity of the administration.

- Problems related to incoming and outgoing cash flows and the deficit and imbalance in-between.

-  Adecrease in surplus of current Operations and inadequate annual rate of return on invested capital. 

- Impairment of equity due to continual losses.

-  Inventory accumulation and the lack of effective demand on the company's products for various reasons such as, for example, high cost or lack of development of the product produced.

- An increase of the outstanding debts owed to banks and other creditors and the continuation of the interest estimation in a manner that affects the outcome of operations. In general, the establishment reflects an imbalance shown in the increase of debts over the equity. 

 - Problems related to the flow and availability of essential materials and supplies for production or the withdrawal of the reliable technical assistance.

- Problems related to increasing of Labor turnover or inefficiency thereof.

- Problems related to facing expected  future events such as the disproportionality of financial resources with the expansion; or the emergence of unbowed competitors, etc .

- Support the self-potentials to raise the capital of the institution either by capital subscription or through new capital issues.

- Control the amount and quality of debts.

- Financing investments with permanent capital.

- Optimal guidance for investment using bank loans

Methods of Restructuring

The financial structure requires reconsidering the financial balances of the institution and determining :itsfinancial capabilities through the following:

- Rescheduling and remittal of  debts: negotiations are held with creditors on debt scheduling or a partial waiver thereof. A comprehensive solution must be reached in this part.

- The transfer of debt to a contribution to the capital. This step may be a bit risky, but still among the solutions.

- Revaluation of Assets.

 - Many assets book values may be lower than their real values. They may be revalued to contain and cover part of the accumulated losses. A study is proposed to determine the legislative amendments required to allow asset revaluation depending on the legal and tax legislation of the State. 

- Collecting receivables from third parties, in order to provide the necessary liquidity. 

- Labor reduction compared to the size of the institution activity.

- Structuring of the financing, exploitation and investment by bringing in the external sources of opening up capitals and establishing new merged companies.