Who are considered impaired creditors in a restructuring context?

In a restructuring context, impaired creditors are those whose claims on a debtor cannot be fully satisfied as a result of the restructuring process. This typically occurs when a company is facing financial challenges and is unable to meet all of its obligations to creditors in full. The impairment may arise due to various reasons, such as a diminished ability of the company to generate cash flows or a reduction in asset values.

Impaired creditors may receive some form of compensation, but it will be less than what they are entitled to under the original terms of their claims. This group is critical in restructuring scenarios because their interests must be considered during negotiations and the development of a reorganization plan.

In contrast, creditors who receive full payment are not considered impaired, as their original claims are honored completely. Shareholders are often related but are typically last in line for recovery in a restructuring scenario, as they rank below creditors in terms of priority. Customers owed product refunds may also be affected, but they do not fit the traditional definition of impaired creditors because their claims arise from the sale of goods rather than from debt obligations to the company.