Actionable Ideas for Companies and Sponsors

Rescue Financing Opportunities for SPACs

The 2020-2021 SPAC boom is suddenly stalling amid a liquidity crunch. According to recent studies, more than 10% of the companies that listed via SPACs during that period have issued going-concern warnings. Inflationary pressures (especially wages and energy costs), supply chain disruptions, longer timelines to ramp up to business plan projections, and higher than expected redemptions are all conspiring to make liquidity harder to find.

Credit funds, direct lenders, hedge funds and strategic parties may be able to fill the gap. These financings allow third-party investors to invest at substantially lower valuations with significant flexibility to structure deals thanks to the existing capital structures of the former SPACs. For example, many of these companies have relatively limited funded debt, allowing potential new investors to take a security interest in all or substantially all assets, enabling down-side protection, and a warrant package that enhances the overall return profile.