Private Equity in the Time of Coronavirus
Advising Private Equity Firms in This Crisis
The past couple of weeks have been game-changing. The Coronavirus pandemic, the prospect of a full-blown recession and an earthquake in the capital markets have precipitated caused perfect storms for many Private Equity firms’ portfolio companies. It’s a full-blown panic out there.
As a direct result, Sponsors are already seeking our advice about liquidity (how to find it, enhance it and create it); when and how to deal and negotiate with their lenders about impending defaults and covenant breaches and how to at least maintain, if not create, shareholder value in the face of such market and financial headwinds.
Significantly, there is no “one-size-fits-all” advice, but rather each portfolio company requires specific, bespoke advice tailored to that particular situation. For example, there are various flavors of lenders, ranging from those interested in being paid back to those who loaned to own. See our CFO series here.
And even more importantly: Sponsors who have enjoyed terrific relationships with their lenders cannot at all count on that to help them weather the storm; even “friendly” lenders will now have their own pressures and should be counted on to be looking after their own best interests at this difficult juncture.
Finally, to the extent there are well-heeled Sponsors with dry powder, there should be enormous opportunities to acquire their debt at a discount. There are various strategies that can be employed here, on the “offense”, if you will, and we refer you to a prior blog series about those.
We here are well-prepared to be helpful here. As experts in advising financially stressed companies, and boards who want shareholders to do well even when creditors are underwater, we pretty uniquely provide unconflicted advice to such boards. And that is because we believe we alone in our space do not advise financial creditors – rather, we only look out for boards and shareholders.
Please contact us if you’d like to have a conversation.