Tue, Jan 19, 2021
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Alternative Market Briefing

Other Voices: Tips to navigate a down round fundraising

Thursday, April 23, 2020

By: Dominick P. DeChiara, Winston & Strawn

Over the past six weeks, control-oriented private equity funds have been hunkering down with their portfolio companies in light of the COVID-19 pandemic. Any and all tactics have been considered and implemented in order to preserve liquidity, including drawing under existing revolvers, working with lenders for relief, taking advantage of loans and tax relief opportunities under the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) (if and to the extent available or even implemented at this time) and operational cash management with customers, landlords, and suppliers.

Despite these efforts, if the global pandemic continues and/or if business does not bounce back quickly enough, many portfolio companies may need additional capital to keep operating. After exhausting all other remedies, Sponsors with dry powder may have to inject additional capital in order to protect their investments at a time when valuations are lower than prior financings.

Sponsor-led down round equity financings come with particular risks that need to be considered, especially in situations where the Sponsor controls a portfolio company with many minority investors. If proceeding down this path, we recommend Sponsors keep in mind the following:

Fiduciary Duties. First and foremost, review the governing documents to confirm whether fiduciary duties apply to directors and controlling equityholders. Although fiduciary duties......................

To view our full article Click here

Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. SPACs: The SPAC shareholder class action boom is coming, SPACs have a hidden risk that investors need to know about[more]

    The SPAC shareholder class action boom is coming From Reuters: I'm not the first to predict it, but the past few weeks have brought unmistakable signs that shareholder class action firms are homing in on Special Purpose Acquisition Companies, those so-called blank-check entities that g

  2. SPACs: Jeremy Grantham: "SPACs should be illegal", Spacs may fuel European IPO boom, SPAC IPOs surge, The SPAC pop is now a thing: More unicorns getting on board, Paysafe readies $9bn IPO Via SPAC[more]

    Jeremy Grantham: "SPACs should be illegal" Special-purpose acquisition companies (SPACs) should be illegal, according to Jeremy Grantham, as they escape regulatory oversight and encourage the "most obscene type of investing." Grantham is the co-founder and chief investment strategi

  3. News Briefs: What if data scientists had licenses like lawyers?, Next generation behind family offices' ESG push[more]

    What if data scientists had licenses like lawyers? From Bloomberg: Data scientists, if they're poorly qualified or act irresponsibly, can do at least as much damage as lawyers and doctors. The algorithms they create can ruin lives, aggravate social divisions, even facilitate genocide.

  4. SPACs: SPAC costs are 'far higher' than previously realized, study finds, Jim Cramer recommends profit taking in speculative electric SPAC names.[more]

    SPAC costs are 'far higher' than previously realized, study finds From Institutional Investor: The costs of going public via a special-purpose acquisition company are both "opaque and far higher" than previously recognized, new research shows. SPAC shares tend to drop by one third or

  5. Institutional Investors: Pensions swamped in a sea of negative real rates, Bahrain's pension fund authority faces collapse[more]

    Pensions swamped in a sea of negative real rates From FA Mag: Defined-benefit pension plans were already barely treading water heading into 2020. In the years ahead, the risk is as great as ever that a large swath of them will drown. As the name implies, defined-benefit pensions promis