Recapitalization is a sort of a 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.
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One example of recapitalization is a leveraged recapitalization, wherein the company issues bonds to raise money, and then buys back its own shares. Usually, current shareholders retain control. The reasons for this sort of recapitalization include:
Another example is a leveraged buyout, essentially a leveraged recapitalization initiated by an outside party. Usually, incumbent equityholders secede control. The reasons for this transaction may include:
Another example is a nationalization, wherein the nation in which the company is headquartered buys sufficient shares of the company to obtain a controlling interest. Usually, incumbent equityholders lose control. The reasons for nationalization may include:
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