Given the relatively low levels of outstanding loan balances and the macro-economic environment over the past couple of years, the number of borrowers/loans that have ended up going into ‘workout’ have been few and far between. PKF Clear Thinking executives provide details on what is needed for a workout to succeed for both lender and borrower.

Irrespective of whether we are in a recession or not, there is almost no debate in our industry that borrowers currently have greater levels of outstandings. Consumer spending is shifting/decreasing, and there is a growing consensus that lenders are going to have to take a harder look at their borrowers and their near-term performance. With higher outstandings and a more challenging business environment, there is a lot less room for error than there has been over the last two years. It is very likely that we start to see an increasing number of deals that will end up in workout. Not to say that every deal that ends up in workout will be easily turned in the right direction, but there are a few things that the secured lender should keep in mind to hopefully make a difficult process less so.

Expertise
As with anything, there are exceptions, but, for the most part, we find that lenders pride themselves on not having lots of deals in workout. That being the case, the number of internal resources with lots of workout experience available is quite small, even to the largest of shops. This is especially true over the last couple of years, where many folks who had workout experience are no longer serving in that capacity as workouts in general have declined significantly since the end of 2020. And while there are still some very experienced workout folks employed in the lending community, quite commonly they are being pulled in many different directions and simply cannot provide the amount of attention and focus that is needed to ensure a smooth and successful process. Hiring a dedicated professional that not only can be involved in the day-to-day needs of both the lender and borrower, but who also likely carries with them decades of experience in successful workouts, is something that should be seriously considered. Not only does the third-party professional bring significant expertise/experience in dealing with workout situations, but they also bring an unbiased opinion as to the issues at hand and can quickly and clearly identify the best path forward.

With almost two decades of helping clients and their lenders through some pretty difficult situations, we can honestly say that, while no two situations are the same, they do follow certain patterns and themes (especially in a given economic cycle). Understanding the patterns and leveraging the lessons learned from each successive client, successful turnaround professionals can fine tune their approach and methodology to each unique situation and can bring a great wealth of possible successful strategies to bear.

Turnaround professionals also bring strong existing professional relationships that can be utilized to access additional/supplemental capital, assist with asset disposition, real estate services, and brand/asset valuation services. 

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