Definition of Recapitalization:
Recapitalization is the process of restructuring a company's debt and equity mixture, often to stabilize a company's capital structure. The process mainly involves the exchange of one form of financing for another, such as removing preferred shares from the company's capital structure and replacing them with bonds.
Recapitalization is a strategy a company can use to improve its financial stability or overhaul its financial structure. To accomplish this, the company must change its debt-to-equity ratio by adding more debt or more equity to its capital. There are many reasons why a company may consider recapitalization including:.
Significant readjustment of a firms capital structure due to (1) issuance of new stock (shares), (2) exchange of bonds for stock, such as a part of a leveraged buyout, (3) reorganization after bankruptcy proceedings. Recapitalization plans must be approved by the required majority of stockholders (shareholders).
How to use Recapitalization in a sentence?
- The purpose of recapitalization is to stabilize a company's capital structure.
- Recapitalization is the restructuring of a company's debt and equity ratio.
- Some of the reasons a company may consider recapitalization include a drop in its share price, to defend against a hostile takeover, or bankruptcy.
Meaning of Recapitalization & Recapitalization Definition