Restructuring Charge
Categories: Banking, Entrepreneur
You couldn't pay back the loans. And principal. Not if they continued at this pace and term set.
Your company owed $80 million, and you were paying 10% interest. You had to pay back the whole loan in 5 years. You levered up to buy that website, but it crashed and its audience disappeared. You had $8 million in interest and $14 million in principal paydown each year, and you just didn't have the cash.
So you suffered a restructuring charge of $5 million, wherein you got the bank to make that $80 million payable in 10 years instead of 5. You got near-term interest reduced to 4% for the next 2 years, and then everything went back to normal. But being able to keep an extra $6 million or so via those extended payments and less interest for a few years really "saves the day." (And why the separated charge as opposed to just a financing cost? Well, at least in theory, most companies don't suffer restructuring charges all the time--hopefully, they are one-time events; they are called out separate from normalized operating metrics of the company.) And so you paid the $5 million restructuring charge and vowed to never buy a website from a talking chicken again.
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