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Distressed Investing: Heads (Opportunities) and Tails (Life Rafts)

Pressures Continue to Grow in the Ag, Logistics Industries

Distressed investing, the theme of this month’s Journal of Corporate Renewal, is particularly germane given the current economic backdrop and engagement uptick many professionals in the turnaround ecosystem have recently experienced. Today’s finance environment undoubtedly offers unique opportunities to certain investor classes—on the flip side, such investment opportunities can also act as a life preserver for troubled companies and ultimately help conserve value that is otherwise lost in the chaos of immediate illiquidity.

Despite the discomforts associated with accepting distressed financing or solutions, stakeholders may endorse them because such measures buy time for the interested parties—such runways offer optionality versus forcing an immediate decision that may have abrupt and devastating consequences. Despite being expensive, optionality and time provide parties the chance to craft innovative solutions to avoid greater resource destruction.

As this month’s authors reveal, such support can take many forms. Credit providers willing to support distressed entities will continue to be a critical component of the turnaround/restructuring environment as Fed rate cuts continue to underperform expectations. Professionals will also play important roles assisting competing groups in identifying sophisticated alternatives. We are fortunate to have firms with specific distressed investing expertise share their insight in this issue.

Christian Koulichkov, a managing director at A&G Real Estate Partners, illustrates how the concept of adaptive use is a silver lining in some otherwise depressed commercial real estate markets. Banks with distressed property-owning borrowers, such as colleges, should consider how this kind of creative repurposing may impact loan recoveries.

Rory Keenan, managing director at Configure Partners, describes how the flexibility and clarity created by a special situations dual-track process can be the Goldilocks choice as compared to either the time-honored bankruptcy toggle or the traditional IPO versus full sale path. Read on to learn more about this special-situation “love child.”

Matthew Hamilton and Tim Bennett, both with Fulcrum Capital, expound on how we as turnaround professionals could benefit by adopting the litigation financing tool that is increasingly used by court-appointed liquidators. Fulcrum explains the factors that funders consider, so that the turnaround and restructuring community can more readily identify when and if the litigation funding route should be explored outside of the typical intellectual property dispute scenarios.

Finally, the Hilco Global team walks us through why even firms who are not experiencing cash flow problems today should prepare immediately actionable expense reduction strategies. In hindsight, management teams who are now bearing the consequences of rapidly changing macro conditions likely see the wisdom of contingency planning in a new higher-for-longer interest rate environment.

In a business environment where it may seem like fortunes can come down to the flip of a coin, the offerings from this issue’s experts will help turnaround professionals prepare for a future that’s not left up to chance.

Jenna Birkhold

Jenna Birkhold

Accordion

Jenna Birkhold is a director in Accordion’s Turnaround & Restructuring Practice with nearly a decade of experience assisting small, mid-market, and large firms in identifying and remediating causes of underperformance. Birkhold earned an MBA from Babson College and a B.S. in political science from Arizona State University. She is a Certified Turnaround Analyst and Certified Risk Manager, as well as a member of the TMA Northeast Chapter’s Board of Directors and NextGen subcommittee.

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