What is meant by 'equity cure' in restructuring?

The term 'equity cure' in the context of restructuring refers specifically to a provision that allows a company to inject equity into the capital structure, which can help reduce leverage. This provision is often included in debt agreements and serves as a mechanism for companies facing financial distress. By infusing additional equity, the company can strengthen its balance sheet, lower its debt-to-equity ratio, and potentially improve its ability to meet ongoing obligations.

In restructuring scenarios, leveraging the equity cure allows the company to address liquidity issues and demonstrate to creditors that it is actively seeking to stabilize its financial position. The infusion of equity can come from existing shareholders or new investors and is generally aimed at providing immediate financial relief while positioning the company for a more sustainable future.