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HMRC internal manual

Corporate Finance Manual

Understanding corporate finance: raising finance: reorganising debt

Reorganising debt

When companies are bought and sold and groups restructure, the existing debt is often reorganised as part of the process.

Transferring debt

Where shares in a company change hands the new owner may want any existing debt to be transferred from the old group into its ownership. The debt transferred may be an asset or liability of the target company. See CFM11170.

Restructuring debt

Where a company finds that it has too much debt it might want to restructure itself, replacing debt with equity or perhaps renegotiating its debt so that the terms are more suitable. See CFM11180.

Management buy-outs and private equity investments

Where a company is the subject of a management buy-out the ‘managers’ will need to raise finance to buy the company and possibly to repay its existing borrowings. Often the driver of the deal is not so much the management of the acquired company, as a fund seeking suitable private (unquoted) equity investments, or even public companies to take private. {#}Such acquisitions tend to have a very high level of debt finance. See CFM11190