Recapitalization

A change in a company’s capital structure, such as an exchange of bonds for stock, usually with the aim of making the company’s capital structure more stable, or to boost the company’s stock price. Recapitalization frequently is undertaken with the aim of making the company’s capital structure more stable, or to boost the company’s stock price). – The replacement of a company’s capital that has been eroded by losses. – The special policy of private equity funds. In the course of this, the company controlled by the fund must take out loans from banks, which are then distributed to the private equity fund as a special dividend. In this way, part of the capital invested flows back to the fund. – This procedure has been widely criticized. But a bank will only lend to the company taken over by the private equity fund if the loans are fully covered by collateral provided by the company itself. This, however, will only be the case if the company reorganized by the fund is again successful on the market. – See cannibalization, burn-out turnaround, buyout capital, delisting, capital management company, private equity financing, restructuring, risk capital, risk monitoring, structured, Vulture Fund, forced capitalization. – Cf. ECB Monthly Report of October 2005, p. 23 et seq. (private equity market in Europe with overviews), Deutsche Bundesbank Monthly Report of April 2007, p. 20 (the ability to recapitalize may also be an indication that business is now going well at the target company), ECB Monthly Report of July 2009, p. 75 (recapitalizations and public finances).

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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