Loan restructuring is a form of debt restructuring applied to bank loans: the lender and borrower agree to change the terms of existing lending because the borrower cannot, or soon will not be able to, perform as originally agreed. The main entry covers restructuring of all kinds of debt, including bonds and sovereign borrowing; this entry notes how the narrower term is used.
In banking, the term usually refers to a negotiated package for a business borrower. It may include a longer repayment period, a payment holiday, a lower interest rate, the conversion of part of the debt into shares, new money from existing lenders, the sale of assets and revised covenants. Where there are several lenders, they commonly agree a standstill while the borrower's position is reviewed. A change to a single loan's terms is more often called a loan modification, and temporary relief is forbearance, though the words are used loosely.
For the lender, a restructured loan is normally reported as forborne and may be classed as a non-performing exposure until the borrower has shown that it can meet the new terms. Restructuring is often preceded by a covenant breach, which gives lenders the leverage to negotiate.