Playbook

We segment financially distressed companies into four distinct categories, defining the nature of the required intervention:

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1. Pre-Breach: Companies that are materially underperforming against prior projections but have not yet breached lending covenants. Intervention is proactive, as a breach is likely without significant operational change.

2. Breach: Companies that have formally breached financial covenants. At this stage, the company is still servicing its interest and principal obligations, but the breach signals immediate financial vulnerability.

3. Default: Companies that have failed to make interest and/or principal payments. These businesses are in critical need of an immediate capital infusion and decisive operational intervention to sustain operations.

4. Lender Controlled: Companies over which the lender has taken control, either through a practical change in governance or through formal restructuring, such as foreclosure or a debt-for-equity swap. Our role is to stabilize and optimize the asset under the lender’s direct oversight and maximize recovery.

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The 4-Phase Framework

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Phase 1: Stabilize 

• Aggressive operating and capital expense reduction

• Cash-flow health as the North Star

• Realignment with creditors

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Phase 2: Reorient 

• Refocus on the core business

• Product focus shift: Prioritizing predictable, low-capital initiatives.

• Develop a more rational short and medium-term strategy

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Phase 3: Reconstitute

• Replacing fatigued management with executives aligned with the capital providers

• Begin executing short and medium-term strategy while prioritizing cash flow 

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Phase 4: Scale

• Achieving EBITDA and Operating Cash Flow positivity for the long-term

• Reigniting growth through organic expansion and M&A.