Recap is short for recapitalizationBut can cover different scenarios : In case one there is no debt issue re creditors but a shortage of capital . A new player enters infusing more capital and takes over management assuming all existing liabilities . In case 2 the company has too much debt given market conditions and lower level creditors convert to equity under a plan of arrangement. Usually the top secured creditor ( a bank) has less need to modify the terms of the debt they hold but it can happen on ocassion .