Recapitalize

To recapitalize means to alter the financial structure of a company, typically by changing its mix of debt and equity. This often involves issuing new shares, selling assets to pay down debt, restructuring existing debt, or a combination of these strategies. The goal of recapitalization is usually to improve the company's financial position, reduce financial risk, increase its ability to invest, or prepare for future growth. It's a strategic move that can impact shareholder value and the overall health of the organization. Often a company will recapitalize to adapt to changing economic times or improve market attractiveness.

Recapitalize meaning with examples

• After a period of significant losses, the company decided to recapitalize by issuing new shares of stock, injecting fresh capital into the business. This allowed the company to pay off some of its high-interest debts, improving its financial flexibility and prospects for future growth. This recapitalization was a move to attract new investors and rebuild confidence in the company.
• To avoid bankruptcy, the struggling airline was forced to recapitalize. They sold off some of their less profitable routes and aircraft. They used the proceeds to pay down debt, negotiate more favorable loan terms with creditors, and shore up the company's balance sheet. The successful recapitalization saved the airline.
• The private equity firm, after acquiring the manufacturing company, moved to recapitalize it. They took on additional debt, using it to fund a dividend payment to the existing shareholders. This leveraged recapitalization allowed the firm to realize a return on its initial investment while maintaining control of the business. This is commonly done to return capital to shareholders.
• Facing an economic downturn, the management team chose to recapitalize the real estate investment trust. By refinancing existing debt at lower interest rates and issuing new bonds, the REIT aimed to reduce its borrowing costs. It sought to free up capital for property upgrades. This recapitalization strategy helped to improve cash flow and weather the economic storm.
• The tech startup, nearing an initial public offering (IPO), decided to recapitalize to simplify its capital structure. They converted some of their convertible debt into equity. This move made the company more attractive to potential investors. This action was a key step to the IPO and future public trading.