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Financial Recapitalization Proposal

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A financial recapitalization proposal is a plan submitted by a company in order to restructure its capitalization (debt and equity) so that it can to ward off a hostile or potential suitor. By changing its capital structure, meaning how a company finances its operations, it can save the company from a hostile takeover attempt by another and then it no longer remains a target. For instance, the company has an option of having a debt-based capital instead of an equity-based capital structure by buying its own shares and issuing debt. This proposal is thus commonly presented in a situation of debt arbitrage.

Sample Financial Recapitalization Proposal:

Name of company: Golden Arches

Address: 92 Norwood Drive, Waco

Name of proposal: Financial recapitalization proposal

Financial proposal prepared on: December 11, 2011

Proposal prepared by: Walter Adams,

Head, finances, Green Mile Offices

Proposal submitted on: December 15, 2011

Purpose: The primary purpose of this proposal by Green Mile Offices is to present the plan for the recapitalization of the company Golden Arches and its existing indebtedness and accounts payable to Green Mile Offices and its affiliates ‘Green Mile Debt in excess of $500 million.

Details of Financial Recapitalization Proposal:

  • The $250 million principal amount of Green Mile Debt will be restructured into new secured loans with a maturity date of December 11, 2013 and the remaining balance of Green Mile Debt will be converted into preferred stock.
  • Golden Arches and its Board of Directors have set up a special committee headed by the chairman which will review and analyze the recapitalization plan.
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