What does a 'liquidity line' provide to companies during restructuring?

A 'liquidity line' serves as a crucial financial tool for companies undergoing restructuring by providing immediate access to cash for operational needs. During times of financial distress, businesses may struggle to maintain their day-to-day operations due to cash flow limitations. A liquidity line is essentially a credit facility that allows a company to draw down cash as needed, ensuring that it has enough liquidity to meet its obligations, such as paying employees, suppliers, and other immediate expenses.

This access to cash is essential for stabilizing the company's operations, providing the necessary resources to navigate through the restructuring process effectively. It enables management to focus on long-term strategic decisions rather than being solely preoccupied with short-term cash constraints. In this context, the liquidity line acts as a safety net, ensuring that a company has the funds required to sustain operations while it restructures its debts and explores options for turning around its financial situation.