When Capital Gets Stuck

Capital gets stuck for a small number of reasons.

The position was structured badly. The counterparty quit responding. The original sponsor lost interest. A document everyone relied on turned out to mean something different than they thought. A creditor in another part of the cap table started moving and the asset froze. The waterfall doesn't work the way the deck said it did.

We see these every week. Same patterns, different jurisdictions.

Stuck capital is the part of someone's balance sheet that should be doing something and isn't. It might be a position that's quietly marked at par but hasn't paid in 18 months. A subscription locked in a side pocket. A loan to a borrower who's still around but stopped engaging. A subsidiary that ran out of attention. A receivable a lawyer keeps "looking into."

The owner of the position usually knows it's stuck. They just don't know what to do about it.

Why it stays stuck

Three reasons, in order of frequency.

The owner doesn't know what's possible. Most allocators didn't underwrite the position themselves; they don't know what their actual rights are, whether the structure allows action, whether the counterparty is bluffing about its own constraints. Without that map there's no decision to make.

The fee math doesn't work at scale. A position worth $1.5m doesn't carry an hourly retainer that produces a useful memo, so the owner does nothing — and the position keeps eroding. The work only happens when the engagement is shaped around the outcome: success share, contingency, flat fee credited against recovery, whatever lines up with the size of the prize.

Nobody is accountable for moving it. It sits on a spreadsheet, gets discussed at quarterly meetings, and then everyone goes back to chasing new deals. Workouts are slow, unrewarding, and don't fit into pipeline reporting.

What we do about it

We get involved at the point where the owner is ready to stop watching the position decline.

That usually starts with a one-page assessment: what the position actually is, what rights exist, what the realistic recovery looks like under a few scenarios, and what the next move costs. We don't bill by the hour for that. If the answer is "leave it alone" we say so.

If the answer is "go," we run the workout. That means writing the demand, sequencing the counterparty pressure, coordinating local counsel where local counsel is required, negotiating discounts, structuring the take-out, and — when needed — sitting at the table with whoever's blocking the resolution. Most of these end without litigation. The ones that don't, we run with counsel we know in the relevant jurisdiction.

Engagement is structured around the outcome. Sometimes a flat retainer plus a share of the recovery. Sometimes a contingency. Sometimes a fee that gets credited back if we don't deliver. The shape depends on the position; what doesn't change is that both sides know what success looks like before we start.

Some clients keep the position in their name and pay us for the workout. Others assign it into a vehicle we manage and we work it out as principal. The shape follows the situation.

What we won't take on

We pass on situations where the recovery math doesn't justify anyone's time. We pass on positions where the right move is litigation and the client wants advice that avoids it. We pass on workouts where the underlying weakness is something a clever structure can't solve.

We say no to the same things we'd say no to with our own capital.

The honest floor

Workouts take time. Some recoveries don't recover. A position that's been sitting for three years rarely turns around in three weeks.

What we can do is tell you what the position is actually worth today, what it might be worth with effort, and what the path between those two numbers costs. Then run that path with you, or step out of the way if you'd rather work it differently.

The job is to unstick capital that can be unstuck — and to be honest about the rest.