For creditors, the restructuring of a distressed company is much more preferable than allowing it to fail. The liquidation value of an enterprise is invariably much less than its value as a going concern. However, for the restructuring process to succeed it is important that there is an early recognition of the difficulties being faced and a willingness among all the stakeholders to make sacrifices to save the enterprise.
It is also crucial to ensure that any financial restructuring is accompanied by a thorough and detailed review of the operational aspects of the enterprise. A financial restructuring goes hand in hand with an operational restructuring.
Only by knowing what profits the restructured business can generate is it possible to create a revised financial structure which will support the new operational levels.