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We’ve spent the last six weeks outlining best practices top direct lenders employ so portfolios generate the highest returns complemented by the lowest risk. Nevertheless, stuff happens. In fact, we count on stuff happening. You need to be prepared to deal with those eventualities.
In a recent conversation, our head of workout, Brent Chase offered his secrets for successfully managing troubled portfolio financings. “First, you have to remain proactive as a lender. Advocate the direction you want to go to other capital providers, owners and management. Otherwise, you’ll be reacting to the strategy and direction of others, which can result in sub-optimal outcomes.
“Also, workouts require hands-on monitoring. Cash flows are more “fragile.” A relatively minor performance miss can have significantly negative liquidity implications. Spotting deviations early and communicating closely with the borrower allows time to deal with issues like cash shortfalls quickly. In our case, LP investments in numerous sponsor funds allows us to engage in more meaningfully direct and active dialogue with sponsors in tough scenarios.”...
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