Workouts are inevitable

January 29, 2024

As many of you know, we’re navigating a number of deals that are either in workout or at risk, none more significant than [ ] as the rest have a relatively clear path to recovery. For [ ], the situation is a bit more complex as the path to recovery is contingent on the viability of the company long term and whether it can either raise more venture capital or turn profitable. This was one of our earliest third part underwritten deals and similar to how we ventured into new asset classes or developed new structures in the past, we’re learning more and getting sharper with each new successive deal. 

Navigating this workout versus prior is a bit different as our push to diversify our investors' portfolio has gotten us to where less than 10% of the total investors in the deal make up 50% of the total deal size. Still, many of those in that 10% have made material investments into the deal and we have taken a very proactive approach to reach out to them, have them understand what happened, and also include them in the process for negotiating the workout. By going down this path, we can do our best to reduce the investor churn we historically have seen when defaults and workouts happen. Coming out of all this, we're going to be implementing a number of changes to simplify deal pages and make it easier to understand what they're investing in and the risk factors associated with it. 

We have learned and gotten smarter with every workout and default we've experienced. The fact that the other deals that are at risk or in workout right now are likely on a good path to recovery is a testament to that and I know we'll come out of this workout stronger as we always do.