Calling All Distressed Companies and Creditors

I believe the time has come for a Paul Revere moment for distressed companies. The world economy is rolling over and it may be powerful enough to knock off many struggling companies that were able to survive over the last year. Its time for secured creditors and owners to now act even though both parties are somewhat happy to avoid an inevitable restructuring with numerous standstill agreements.

Over the past year I have sadly seen both owners and creditors take losses that were unnecessary had they both acted faster. Owners need to dramatically examine their businesses operations and prune products and services that are bleeding them. At the same time they need equity capital for both working capital and funds to pay off creditors for a stronger balance sheet as the company is shrunk to profitability. I realize more than anyone that its difficult to see your ownership diluted with new capital. However, a smaller stake in a healthier company and release of personal liabilities are enormous advantages that can often come from investors such as myself.

For creditors, its time to realize that for every dollar of availability that is taken away from your client or lost to unprofitable operations, going concern value is being destroyed. I believe that going concern value will be a critical component of your recovery as collateral values plunge in the coming downturn. The last thing secured creditors will want over the next year is a liquidation. As a result its time to take action and work with your client to stop working capital from disappearing like a melting ice cube.