Restructuring: Positive Strategic Moves Restructuring

Restructuring: Positive Strategic Moves

Restructuring can refer to a number of strategic moves on the part of an organization. The term can encompass everything from renegotiating existing debt to reorganizing the infrastructure of the organization. Although the phrase "we are working on restructuring our organization" is often used to comfort shareholders when a company's fortunes have been flagging, "restructuring" is not a dirty word, it can merely refers to an attempt to maximize value and savings to generate a profit as well as to prevent future losses.

However, according to conventional economic perceptions of strategy, restructuring a company's debt might seem to be confirmed to a corporation undergoing financial difficulties. but, even when his real estate empire was strong, Donald Trump restructured the bonds outstanding on his casinos, asserting that "until we have a package (debt restructuring) that's satisfactory, we're going to withhold payment" of the $90 million interest payment due on specified bonds (Ryniker 2008). Although Trump could pay the debt, he wanted to get better conditions on the terms of the bonds from his creditors. Negotiating from a position of strength, Trump was able to generate additional value for his organization. Thus, through debt restructuring, value can be generated for even a solvent organization. Favorable debt concessions through restructuring can include reducing the rate of originally agreed-upon interest or extending the amortization period to reduce a monthly debt service requirement.

In terms of infrastructure restructuring, when the technology company EarthLink, experienced financial difficulties and garnered a rating of underperforming by market analysts, it was suggested that it shut down or reduce some of its previously-proposed targets for expansion, divest some of its assets, and contain costs within its core connectivity enterprise through consolidating departments and cutbacks (Savitz 2007). Although limiting the company's scope for expansion might seem to be a negative rather than a positive move, when a restructuring is announced, greater confidence can be generated amongst shareholders, because of the company's demonstrated commitment to enhancing shareholder value through cost containment and an acknowledgement of its current difficulties. Announcing a restructuring even for a troubled company suggests that its difficulties are not insurmountable, provided the organization keep its eye upon the future, and restructuring a high-performance organization can be an effort to generate further value and profits, and reallocate current assets in areas better suited for expansion, like research and development.