What is 'Reorganization'

Reorganization is a process
designed to revive a financially
troubled or bankrupt firm. A
reorganization involves
the restatement of assets
and liabilities, as well as holding
talks with creditors in order to make
arrangements for
maintaining repayments.
Reorganization is an attempt to
extend the life of a company
facing bankruptcy through special
arrangements and restructuring in
order to minimize the possibility of
past situations reoccurring.
A change in the structure or
ownership of a company through
a merger or consolidation,
acquisition,
transfer, recapitalization or change
in identity.

BREAKING DOWN
'Reorganization'
1. The first type of reorganization is
typically bad news for shareholders,
who are likely to lose everything. If
the company emerges successfully
from the reorganization, it may issue
new shares, which will wipe out the
previous shareholders. If the
reorganization is unsuccessful, the
company will liquidate and sell off
any remaining assets. Shareholders
will be last in line to receive any
proceeds, and will usually receive
nothing unless money is left over
after paying creditors,
senior lenders, bondholders and
preferred shareholders.

The business continues operating

and works toward repaying its debts.
It is considered a drastic step and the
process is complex and expensive.
Firms that have no hope of
reorganization must go
through chapter 7 bankruptcy, also
called liquidation bankruptcy.
2. The second type of reorganization
is more likely to be good news for
shareholders in that it is expected to
improve the companys performance.
To be successful, the reorganization
must improve a companys decisionmaking capabilities and execution.
This type of reorganization can take
place after a company gets a
U.S.
bankruptcy law gives public
new
CEO.
companies
ansecond
option type
for of
In some
cases, the
reorganizing
rather
than
reorganization is a precursor to the first
liquidating.
Through
chapter
type. If
the companys
attempt
at
11
bankruptcy,
firms
can
reorganizing through something like a
renegotiate
their debt
withnext
theirtry
merger
is unsuccessful,
it might
creditors
to
try
to
get
better
to reorganize through chapter 11 terms.
bankruptcy.