I’m reading other definitions online and it says that it allows companies to restore liquidity & be more flexible. How? What do they mean by more flexible?
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Let’s use an individual based example… you have a 15 year, 4% mortgage. You earn $4000/mo, your mortgage is $1500/mo. You see that rates are low, and you not only decide to get a mortgage for 2.8% but you also decide to choose a 30 year mortgage. Now your mortgage drops to $1000/mo. This gives you an extra $500/mo to work with… could simply pay more toward mortgage and still try to pay it off sooner. But you also might want to invest it in stocks. Or use it as a car payment. Or to help cover your new baby’s daycare. You have more flexibility with that money freed up. Companies can similarly use money that would have gone to debt repayment and better invest it in the business by restructuring.
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