About Services Case Studies Insights News Resources Gordian on Leveraging Market Uncertainty in Restructuring Private Equity Investments | Journal of Corporate Renewal February 2, 2021/News, Private Equity Series more David L. Herman, Partner; Peter S. Kaufman, President; & Liam D. Ahearn, Managing Director of Gordian Group Write Feature Article for Jan / Feb TMA Journal of Corporate Renewal, the official publication of the Turnaround Management Association (TMA) Leveraging Market Uncertainty in Restructuring Private Equity Investments There is necessarily a tension that exists in any financial restructuring, and this is particularly so in the current environment considering that: 1. Creditors want both to (a) avoid an immediate write-down, particularly if they believe the business may rebound in the near- to mid-term, and (b) have shareholders/sponsors fund additional equity to support the business, all while keeping the company on a short forbearance leash. 2. Conversely, boards, shareholders, and management do not want to work solely to preserve, and create, value for the benefit of their creditors or to invest additional capital underneath “Mt. Debt,” particularly given uncertainty as to the timing, and extent, of a turnaround. This is especially relevant in situations involving private equity firms, which have their own financial return expectations, investment horizons, and—most critically in workouts— perhaps additional capital available to invest under the right circumstances. Today, nimble companies and sponsors want to take advantage of market uncertainty to achieve advantageous global capital structure solutions, while creditors seek to avoid that. The exogenous market today presents an opportunity to restructure to the benefit of sponsors— and even for sponsors concerned about lender relationships, there may well be a necessity to do the same. Drivers of Private Equity Restructuring Certain themes are consistently being seen across restructurings, including the following: COVID Operational Impacts. Companies are running afoul of certain covenants (e.g., leverage, coverage) and/or require incremental liquidity as COVID-19 takes its toll in their marketplaces. Lender Wants. Lenders fear uncertainty and want sponsors/ owners to inject new equity beneath the existing capital structure (Mt. Debt)— all in return for only short-term waivers (three to nine months). Click Here to continue reading Leveraging Market Uncertainty in Restructuring Private Equity Investments article PDF Click Here to read on TMA online (subscription required). RELATED: Report From the Front: Private Equity Restructuring in the COVID Era more Pages Cost of Capital (6) Events (31) Insights (49) Perspectives (28) Private Equity Series (16) Sector Spotlight (8) Media Coverage (207) Audio (10) Print/Online (127) Video (69) News (41) Press Releases (23) Publication (4) Questions that Keep CFOs Up at Night (10) Recognition (67) Post navigation ← Discussion: Opportunity Zone Fund Investments. Are They Right for Family Offices? Gordian Perspectives for February 2021 → Gordian Group, LLC 950 Third Avenue, 17th floor New York NY 10022 212.486.3600 212.486.3616 info@gordiangroup.com careers@gordiangroup.com We Wrote the Books When boards and equity owners need specialized help...Gordian Group wrote the definitive books in our field: Equity Holders Under Siege: Strategies and Tactics for Distressed Businesses and Distressed Investment Banking: To the Abyss and Back. See our Publications page for details. © Gordian Group, LLC, LLC–GORDIANSM and GORDIAN GROUPSM are service marks of GORDIAN GROUP, LLC. · Privacy · Legal · Member SIPC and FINRA · BrokerCheck Icons used on this site are made by Freepik, monkik, prettycons, and dDara from flaticon.com and are licensed by CC 3.0 BY. · Photos Copyright © Alexa Van de Walle · Site by Transmit Studio