FICC Focus SCP’s Perkins on Middle-Market Workouts: State of Distressed Debt
Apr 12, 2025
Lawrence Perkins, Founder and CEO of Sierra Constellation Partners, discusses the vital role of relationships in reviving middle-market companies. He reveals a rise in 'distressed by accident' lenders due to the private credit boom and contrasts different bankruptcy procedures like Chapter 11 and Assignment for the Benefit of Creditors. The conversation also touches on the significance of company culture and employee support in overcoming financial turmoil, emphasizing strategies that keep businesses resilient in volatile markets.
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Perkins' Unexpected Career Path
- Lawrence Perkins found his passion in distressed debt by accident while working in investment banking during the dot-com bust.
- His work in turnarounds involved intense engagement with on-the-ground teams, which he found rewarding and humanizing.
Middle Market Distress is Persistent
- Middle-market distress is more persistent than the cyclical large-cap distress due to capital constraints and private equity pressure.
- Private equity demands doubling company value quickly, often leveraging companies, which reduces nimbleness and increases risk of distress.
Two Types of Lenders in Distress
- Two types of direct lenders exist: 'distressed on purpose' with expertise and infrastructure for workouts, and 'distressed by mistake' who require education.
- Processes move smoother when lenders are prepared and knowledgeable about distress restructuring.