Corporate distress is rarely a surprise to participants in the capital structure, and it usually rears its ugly head over a series of unfortunate events. Customer losses, an unfavorable shift in industry dynamics, delayed G&A cuts, covenant breaches, and dwindling liquidity are just a small...
The law surrounding distressed acquisitions has been evolving rapidly for the past decade. The loan-to-own strategy, in which a would-be buyer purchases existing debt at a discount as a tool to achieve ownership of the target company, has been one of the favored strategies of value investors...
The ground is shifting under private equity (PE) firms. Strong fundraising in vintage years combined with slower deal flow has led to PE firms holding onto more and more capital, with few true value-creating opportunities available in developed industries and markets. Combine those facts with...
Because of the typical three- to five-year holding period of private equity firms’ ownership in portfolio companies, PE firms are typically highly experienced in the acquisition and disposition of companies and the nuances of dealmaking. In the current environment, where access to capital is...
Private equity firms routinely appoint directors to boards of their privately held portfolio companies and other investment vehicles, some of which will eventually face financial distress. Often, a person appointed to a board by a private equity firm has a relationship with the firm ( e.g. , they...
Portfolio companies sometimes fail. This obviously isn’t breaking news, as master funds routinely divest themselves of investments. Sometimes the investment never worked out, or the portfolio may have simply run the course of its natural shelf life. Whatever the impetus may be, it’s important to...
Distressed investors often spend hundreds of thousands, or even millions, of dollars conducting diligence, negotiating transaction documents, and participating in uncertain auction and legal proceedings. The process is not for the faint of heart. A distressed investor may end up with the proverbial...
It has become increasingly common for foreign companies subject to pending insolvency proceedings abroad to utilize Chapter 15 of the U.S. Bankruptcy Code to achieve their global restructuring goals. However, despite the growing number of Chapter 15 cases, uncertainty remains as to the role of...
The U.S. oil and gas industry has continued to suffer substantial distress this year, with oil prices falling below $35 per barrel. Since late 2014, the industry has grappled with both severely depressed oil prices and burdensome debt levels. Global oil prices began trending lower in summer 2014 as...
Buying bankruptcy trade claims can be attractive for distressed investors, while also providing an important and necessary potential source of liquidity to a wide range of creditors. Buying unsecured debt or “claims” against companies that are in bankruptcy, however, is risky no matter how an...
