Capital structure
The Business May Be Viable. The Balance Sheet May Not Be.
Many companies that come under financial pressure have good products, loyal customers, and capable people. What fails them is the debt they carry, not the business they run.
The distinction that matters
A business problem and a balance sheet problem need different solutions. Treating one as the other destroys value.
Debt taken on for an acquisition, an expansion, or to get through a hard year can outlast the reason it was borrowed. Interest and repayments start to absorb the cash the business needs to operate and invest. Covenants tighten, lenders grow cautious, and management time is spent on the lenders instead of on customers.
When the underlying business still works, the answer is rarely to break it up. It is to reshape the capital structure so the business can carry it, and to do that while there is still time and goodwill to negotiate.
Early warning signs
When the balance sheet starts to lead the business
Covenant breaches
A breach, or a forecast that shows one coming, is the clearest signal that the current structure no longer fits.
Tightening liquidity
Cash is stretched, suppliers are paid later, and short-term borrowing is covering longer-term needs.
Approaching maturities
Debt falls due in the next year or two and refinancing on acceptable terms looks uncertain.
Strained lender relationships
Waivers are harder to obtain, reporting demands increase, and lenders start asking for more control.
Underinvestment
Debt service is crowding out the spending the business needs on people, equipment, and growth.
Management distraction
Leadership time is consumed by lenders and liquidity, leaving less for customers and operations.
Early intervention. More options.
The earlier we start, the more paths remain open
Amend and extend
Renegotiating covenants, maturities, and repayment profiles with existing lenders to give the business room to perform.
Debt-to-equity swaps
Converting debt the business cannot service into equity, so lenders share in the recovery and the company can trade forward.
Refinancing and new capital
Replacing or supplementing existing debt with financing and investment better suited to the business as it is today.
Once a situation becomes a crisis, these choices narrow quickly and the outcome is increasingly decided by others. That is why Elliott Wright & Anderson positions itself ‘upstream’, working with companies, lenders, and investors as soon as covenants are seen to have been breached.
How we help
Separating the business from its balance sheet
Assess viability
An independent view of whether the business works on its own merits, and what it can realistically support.
Design the structure
A capital structure sized to the business’s cash flows, with a clear case every stakeholder can evaluate.
Negotiate and deliver
Leading discussions with lenders and investors through to agreement, and staying engaged until the plan is in place.
Confidential consultation
When the pressure is on, talk to us early.
The sooner we're involved, the more options you keep. Every conversation is confidential.