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An Overview of Restructuring

Glenn W. Merrick, Problems and Opportunities During Hard Times in the Minerals Industry (1986)

Success in the current economic climate demands much from even the most determined and resourceful entrepreneur. In the mining industries, however, buffeted by slackening demand, deteriorating prices and shrinking margins, the realistic challenge during the next several years may be survival rather than prosperity. Meeting that challenge will require not only careful and creative financial planning, it may well hinge upon management's appreciation of the principles of “restructuring”.

Restructuring, as that term is used in this paper, connotes the modification or conversion of the liabilities and/or capital structure of the business. Restructuring may be accomplished either within or without the judicial arena. The most common form of judicial restructuring is bankruptcy—one of the principal focuses of this special institute. There are other forms as well, however. For example, banks, savings and loans and insurance companies do not qualify for bankruptcy relief,1 and the reorganization or liquidation of those entities must be accomplished under court supervision pursuant to other state and federal laws.2 Restructuring may also be effected without the intervention of judicial process. The generic term for restructuring outside the confines of a judicial forum is “workout”.

II. SOME PRACTICAL ASPECTS OF WORKOUTS
A workout may be quite formal (for example, i