Introduction

The Covid-19 pandemic has caused significant disruption to the global economy, and the asset management industry is no exception. Fund sponsors have been focusing significant time, efforts and resources supporting their portfolio investments through the crisis. While the fundamentals of many portfolio companies and assets are still strong, businesses are facing a cash flow crunch - whether that is due to direct impacts of closure by government action, reduced trade volumes due to social distancing measures or reduced consumer confidence, numbers of employees able to work, or key suppliers being impacted. Access to additional funding may therefore be the difference between survival and collapse, and not just in the short term - as the initial wave of measures are being relaxed, many businesses will require an injection of capital to restart, having held off payments to suppliers and others to conserve cash during lockdowns, as well as factoring in the impact of continuing social distancing and other measures on profitability.

This note considers some of the options available to fund sponsors to provide cash injections to portfolio investments within existing fund structures and fund terms. It also examines other opportunities including raising dislocation funds and top-up funds, undertaking cross-fund transactions and GP-led restructurings, and finally looks at how GP-led secondaries may come into play.