Covenants under pressure
How bad are things, really?
The earlier the honest assessment, the more options stay open.
Covenant stress is a negotiation, not a verdict, and the analysis going in sets the foundations for the terms coming out. We map both sides’ real alternatives across the full capital structure, complementing the finance team rather than duplicating it.
A delayed contract renegotiation threatened a covenant test while the underlying EBITDA outlook was unchanged. On paper the bondholders held all the power; in practice their hand was weaker than it looked, and a sober reading of both sides’ real alternatives reshaped the renegotiation. The bondholders took a few basis points and relaxed the covenants, giving the company a cushion of extra headroom. A potential crisis turned into a win-win.
The full story →Under stress, the balance sheet is a reserve. The same segmental analysis that finds profit can find pockets of available working capital.
One retail turnaround identified ten years of seasonal inventory held at cost of acquisition. Clearing it hit the P&L but reduced storage costs and converted the dead stock into much-needed cash.
Financial structure rewards ongoing attention and punishes the assumption that, because it was set up correctly at the start, it will look after itself.
A transfer pricing structure built for multiple loss-making entities had not been revisited as those entities reached profit, leaving $1M of tax exposure in a gap that sat somewhere between the legal and finance functions. Until the size of the prize became clear, transfer pricing did not need an owner.
The full story →Arrow’s experience includes supporting a CEO through the zone of insolvency across a complex group structure: creditor dynamics, directors’ duties, and cash discipline handled alongside the strategic answer. In the US, NEDs are broadly shielded by the Business Judgment Rule. But in European entities, NED inaction can trigger personal civil liability for company debts as well as criminal charges, with only marginal help from D&O insurance.
The method in full, in our investment lifecycle article: Financial Structure.
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