Process of negotiating new loans to replace existing obligations, either by lengthening maturities, deferring of loan principal payments, or reducing interest rates, where the alternative is Default by the borrower and seizure of collateral by the lender. In commercial lending, rescheduling can take the form of a Troubled Debt Restructuring, in which the lender offers the borrower a concession, such as a lower rate of interest, that it would not consider ordinarily.
In loans to less developed (LDC) countries, debt rescheduling is often carried out jointly with financial aid agreements, such as multi-year Structural Adjustments supervised by the International Monetary Fund, which are intended to encourage internal economic reforms and increased private sector participation in the economy of the debtor nation. See also Buyback; Debt for Bond Swap; Debt for Equity Swap.
