This is an informal process outside of the statutory regime. If a problem is identified and acknowledged early enough then this may be a viable option.
Fundamentally this a creditor compromise without all of the costs, publicity and complexities that a formal creditor compromise can entail. Essentially the company’s creditors agree by contract to defer, compound or compromise their debts, with or without additional injections of working capital or other supporting mechanisms; (for instance debt for equity swaps).
The advantages of a workout are flexibility, more control and less expense and complexity but they still require the agreement of all of the company’s creditors however depending on the state of solvency and type of creditors a work out in some circumstances may be achieved by working with a limited number of key creditors.
If the later situation is not the case then a work-out as a form of corporate rescue is unlikely to be a practical proposition unless the company’s creditors are a limited and a relatively homogenous group.
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