Consensual out of court restructurings will typically require between 75% and 100% of lender's consent to go forward. Depending on the legal jurisdiction involved, the terms of each facility and the presence of enter creditor agreements, bond holders, for instance, might require 75% to 90% consent. If the money terms, which refers to how and when a loan is payable by the borrower and includes terms such as interest expense are to be amended, lenders can agree to amend a number of factors in relation to the date, such as additional funds or new money. The lender could agree to additional capital to support the funding requirement that typically arises for a company to implement its turnaround plan. This additional debt can be provided at various levels of the capital structure, but will most likely be ranked on a super senior basis. In other words, ahead of all the existing debt already outstanding for the company.

Existing creditors may agree to being superseded in the capital structure and therefore reducing their likely recovery rate if the company were eventually to become bankrupt. As they may view this additional funding as the best way to ensure the company continues as a going concern and is able to repay their liabilities in full in the future. Amend and extend. This is where lenders agree to extend the maturity of the loan and potentially giving a temporary suspension to interest payments and principal repayments. This is done to allow the company more time to be able to generate the cash needed to make the necessary repayments.

This is detrimental to the lenders since they have to wait longer for their money. So this extension is typically combined with amendments to the terms of the original deal, which provide credit enhancements such as increased interest rates, expanded security packages, meaning the lender has a claim on more assets of the company in the event of bankruptcy or tighter covenants. Exchange offers. Here lenders agree to receive a new debt issuance in exchange for all or part of their existing outstanding debt. One common form of such transaction is to exchange unsecured debt for a lower principle amount of secured debt. The aim of this is to increase lenders expected recoveries given the higher ranking in the event of default, while the overall debt burden of the company is reduced through the lower overall debt amount. For example, a creditor with a $100 million unsecured loan who might expect a Recovery rate of 20% would only end up with $20 million. But if they agreed to exchange that for $70 million of senior secured debt with an expected recovery rate of 50% in the event of default, they would recover $35 million, putting them in a better position than the original $100 million. Unsecured loan reduction in debt principle lenders can agree to a haircut in their total outstanding debt exposure as part of, for example, an overall turnaround plan or exchange offer, which would reduce how much the company owed to them. In addition, they might ask for the amount of debt that was given up to be converted into a different tranche of debt. For example, this new debt tranche could be an unsecured debt with interest paid in kind rather than in cash and sitting outside the restricted group. Or it could be in the form of equity, meaning this would be a debt to equity swap that can potentially result in the transfer of the ownership of the company to the lenders in part.