Recapitalization - Misplaced Pages

(Redirected from Recapitalisation) Reorganization of a company's capital structure

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Recapitalization is a type of corporate reorganization involving substantial change in a company's capital structure. Recapitalization may be motivated by a number of reasons. Usually, the large part of equity is replaced with debt or vice versa. In more complicated transactions, mezzanine financing and other hybrid securities are involved.

Leveraged recapitalization

One example of recapitalization is a leveraged recapitalization in which the company issues bonds to raise money and then buys back its own shares. Usually, current shareholders retain control. The reasons for such a recapitalization include:

Desire of current shareholders to partially exit the investment
Providing support of falling share price
Disciplining the company that has excessive cash
Protection from a hostile takeover
Rebalancing positions within a holding company
Help to improve the stock of the company during a time of poor economic conditions

Leveraged buyout

Another example is a leveraged buyout, essentially a leveraged recapitalization initiated by an outside party. Usually, incumbent equityholders cede control. The reasons for this transaction may include:

Getting control over the company via a friendly or hostile takeover
Disciplining the company with excessive cash
Creating shareholder value via gradual debt repayment

Nationalization

Another example is a nationalization in which the nation in which the company is headquartered buys sufficient shares of the company to obtain a controlling interest. Usually, incumbent equity-holders lose control. The reasons for nationalization may include:

Saving a very valuable company from bankruptcy
Confiscation of assets
Executing eminent domain

Nationalisation is essentially a move by the nation of the company to acquire controlling interest in the company, either through buying majority shares with a motive to:

1) eliminate dominance of the shareholders.

2) own controlling interest in the company

It can also be an attempt by the national government to rehabilitate its position financially by issuing bonds to increase public debt and meet immediate liabilities.

References

"What is a Recapitalization". p. 1.

Corporate finance and investment banking

Capital structure

Transactions
(terms/conditions)

Equity offerings	At-the-market offering Book building Bookrunner Bought deal Bought out deal Corporate spin-off Direct public offering Equity carve-out Follow-on offering Greenshoe Reverse Initial public offering Pre-IPO Private placement Public offering Rights issue Seasoned equity offering Secondary market offering Underwriting
Mergers and acquisitions	Buy side Contingent value rights Control premium Demerger Divestment Drag-along right Management due diligence Managerial entrenchment Mandatory offer Minority discount Pitch book Pre-emption right Proxy fight Post-merger integration Sell side Shareholder rights plan Special-purpose entity Special situation Squeeze-out Staggered board of directors Stock swap Super-majority amendment Synergy Tag-along right Takeover Reverse Tender offer
Leverage	Debt restructuring Debtor-in-possession financing Dividend recapitalization Financial sponsor Leveraged buyout Leveraged recapitalization High-yield debt Private equity Project finance

Valuation

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