Rescue Financing And Private Equity

Almost no part of the business world has escaped the impact of the COVID-19 pandemic. The lockdowns that sought to control the spread of the virus had the side effect of sucking demand out of the world economy. That led to a need for liquidity: business plans were simply not designed to cope with the write-off of an entire financial quarter.

In some cases, the response was straightforward. Existing liquidity lines with relationship banks were increased, or new ones put in place. But other cases have been more complex, requiring different approaches by portfolio companies and their private equity backers.

1. Ask the Sponsor

The existing private equity sponsor is often the most obvious source of new capital for a portfolio company, and lenders will frequently call for the injection of additional equity to provide working capital. The maxim 'last money in, first money out' usually guides private equity expectations. Rescue financing – either as equity or