Debt restructuring is applied when a borrower is unable to service debt under previous terms. Possible modifications include: extension of maturity, reduction of interest rate, postponement of principal payments, change of payment schedule, or partial debt forgiveness.
For a creditor, restructuring is typically more advantageous than forced collection: recovery through sale of collateral takes time and yields less than retaining a paying borrower.
In bond offerings, restructuring requires agreement from bondholders and is formalized through changes to the terms of issue. For an investor, this means deterioration of initial parameters — later maturity date, lower coupon — but generally a better outcome than default followed by collection proceedings.
Key distinction from refinancing: the latter is available to a performing borrower and improves terms, while restructuring occurs when difficulties have already arisen and is reflected in credit history. In corporate borrowing, the quality of guarantees and collateral largely determines the conditions under which creditors agree to a revision.