Prepare New-Look Balance Sheet (Warm Restart)
A Step in a Management Maneuver in the Mezzanine Stage of Startup Development
Preparing a new-look balance sheet is a step in the process of restarting the Company. The Warm Restart is designed to boost momentum by shedding excess baggage.
Any changes to the share structure require investor approval. When a company loses momentum and progress grinds to a halt, it's just a matter of time before it burns out of cash and heads for Shutdown or Bankruptcy. Savvy shareholders and creditors are aware of this and are sometimes prepared to make sacrifices to contribute toward the success of a warm restart process. If the existing shareholders and creditors are not exactly volunteering to give the company a break, often an incoming investor has the leverage to twist their arms - If I don't invest, this company will likely go bust and your shares and notes will be worth nothing.. I'm prepared to invest if you make a contribution and reschedule the debt and approve a cram-down of the shares. Whether it's considered arm twisting or a gun to the head, it is an effective strategy that's often used with success. In a distressed situation, the share structure and the liabilities on the balance sheet can sometimes be restructured, shedding baggage from the past and lightening the load for the existing team.
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