Recapitalization

Recapitalization is a type of 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.

==Leveraged recapitalization== One example of recapitalization is a leveraged recapitalization in which the company issues bonds to raise money and then buys back its own shares. Usually, current shareholders retain control. The reasons for such a recapitalization include: Desire of current shareholders to partially exit the investment Providing support of falling share price Disciplining the company that has excessive cash Protection from a hostile takeover Rebalancing positions within a holding company Help to improve the stock of the company during a time of poor economic conditions