Never Let a Capital Structure Crisis Go to Waste Part 1, Co-Authored by Gordian Partners | The Deal

Peter S. Kaufman, President, David L. Herman, Partner & Liam D. Ahearn, Managing Director Co-Author Op-Ed: Never Let a Capital Structure Crisis Go to Waste

Part One of a two-part series, The Deal

August 4, 2021

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Private equity firms with portfolio companies experiencing capital structure challenges also have opportunities.

Never Let a Capital Structure Crisis Go to Waste – Part One: Private equity firms with portfolio companies experiencing capital structure challenges may not believe it, but opportunity is knocking. It’s the opportunity to either purchase their debt at a discount or to revest the portfolio company with a new capital structure that benefits shareholders at the expense of its lenders. Uncertainty in the financial markets or in the company’s own markets can be utilized far more nimbly in negotiations by the sponsor than by its creditors.

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In short: We advocate elegant and comprehensive capital structure solutions; not temporary Band-Aids. And we only want to see new sponsor funding come in as part of an overall fix — and not before. We also want to dispel the myth that a financial restructuring equates to creditors receiving all or most of the equity. That does happen, but by and large only when financial advisers involved are unable to give unconflicted advice to boards (for example, when they also advise financial creditors in other deals).

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