Released on: January 27, 2008, 2:00 am

Press Release Author: barbara camie

Industry: Financial

Press Release Summary: Debt relief is a plan proposed by various banks to bring
companies out of the red or to prevent them from going bankrupt due to various
reasons.

Press Release Body: It is also about helping companies getting rid of bad loans that
would drawn the company to the verge of collapse due to certain financial
indiscipline within the organization. There is a special law that takes care of the
debt relief for companies and it was evolved by the US government as more and more
companies applied for bankruptcy, which ultimately affected the economy. If
companies go bankrupt, it could mean loss of labor eventually the national
productivity level will take a hit. In an effort to save the companies, the debt
relief plan was evolved.

Under debt relief, the government will agree to subsidize some share of the loan
through an arrangement with the bank that has offered the loan to the organization.
By clearing the loan on behalf of the company, the government will hold some amount
of equity in the company. The government will also appoint its representative to
monitor the day to day affairs of the company. If there are any financial
irregularities or deviations as noticed by the representative, it will be
immediately brought to the notice of the government and the bank concerned. Since
the list of the companies seeking government\'s participation in the equity is
longer, many banks also step in to provide the debt relief.

Banks have evolved debt relief scheme on the basis of mutually beneficial options.
If a particular company or organization has lent money to a company and the latter
is not in a position to repay it at the earliest, banks will step in. They will
agree to take over the debt and provide relief to the company. However, for this,
the bank should be convinced of the company\'s good performance in the future.
Besides, it also depends on how much amount of fixed assets the company has. Once
the bank clears the debts of the company, it takes control of the fixed assets such
as land, machinery, inventory and the buildings of the company. This is to make sure
that it does not lose its investments in the company in the form of loan. The fixed
assets also act as the collateral for the bank in case the loan given towards debt
clearance cannot be reclaimed. The assets are mortgaged by the company to the bank,
which has come to its rescue. It is a very complex process. Not always do bank step
in to help the company. If the company falls into its space of expertise only then
the banks step in.

Banks that offer debt relief also exert control over the management and the finance
wings of the companies. Any crucial decision relating to the finances of the company
has to be referred to the bank. If the bank finds that the decision taken by the
company is not appropriate and could affect the company\'s performance, it will be
rejected. The company has to follow the bank\'s instructions.

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