April 14, 2020

What risks should be considered when an AquiCo is working mainly with bank loans?

If the covenants are breached times, banks may have the right to claim their loan collateral like the shares in AquiCo or the portfolio company.

The bank may also consider selling non-performing loans to institutional LPs. Distressed debt funds, vulture funds and hedge funds are typical purchasers of such loans. Such a purchased may have the aim to take over the portfolio company by debt to equity swaps and squeezing out fund as equity holder.