Debt restructuring agreements between companies and financial institutions that have provided needed capital is not an uncommon occurrence. In fact, the process happens to businesses throughout the world. The media is currently bringing attention to this issue with stories of Sahaviriya Steel's struggle, Thailand's largest steel manufacturer. The company is currently going through the debt restructuring process after struggling to manage a debt to three creditors that tops $1.4 billion American dollars in addition to outstanding loans to banks and other lenders. The company is looking to restructure agreements with its three main creditors.

When making its determination, the company took a variety of options into consideration. Examples included capital raising and selling assets. A recent article in Reuters covered the issue, noting the strategy implemented by the company aims to ensure that the company satisfies its creditors while also continuing normal operations.

Lessons for companies in similar situations in the United States

Businesses here in the United States can face similar difficulties. When debt threatens a business, some possible solutions include:

  • Loan workout. This example is also referred to as a loan modification. The American Bar Association, a group of legal professionals from throughout the country, notes that this process is dynamic. It is designed to meet two main goals: identification of the problem or problems that exist in the relationship between the lender and the business and adjustments to better ensure a more successful relationship.
  • Debt reorganization. Some businesses may find it most beneficial to move forward with a Chapter 11 or Chapter 13 petition for relief through bankruptcy. These options allow businesses to reorganize debt in a manner that makes it more manageable. The goal of these plans is to allow the business to repay the debt while protecting the business from creditors who may attempt to seize property.
  • Forbearance agreements. In some cases, a financial institution that is providing a loan for the business will agree to a suspension or reduction of payments that are due on the loan. This generally is set up for a specified and limited period of time.

Some businesses may require the use of more sweeping measures. Options to consider in these situations include mortgage foreclosure, commercial insolvency or business dissolution.

Importance of legal counsel

Businesses facing these difficult situations are wise to seek the counsel of an experienced commercial loan workout and debt restructuring lawyer. This legal professional will review the details of your unique situation and help to build a plan to better ensure a more favorable outcome.