Workout Speed Is a Trap

The biggest reason workout recoveries fall short isn't bad analysis - it's usually bad timing.  Exit too early or too late and the original thesis no longer matters.  Pressure often moves you at the exact moment when waiting would often produce a better result.

Four timers

Every troubled position runs on a small number of clocks:

• Liquidity runway: how long the business keeps operating before cash runs out. The hard constraint. When this gets short, everything else becomes secondary.
• Asset realisation: secondary-market assets and regulated positions simply take time.  Those timelines may don't care about your reporting cycles.
• Counterparty readiness: early on, the borrower often hasn't accepted the full picture.  Push too soon and they dig in.  Waiting for the moment they genuinely concede is usually a smarter tactic.  It may seem like you're being passive, but it's not - treat it as deliberate.
• Legal process: insolvency moves at the speed of the courts.  Creditors often expect months and end up with a process that takes years.  That's simply how it works.

Trying to force these clocks to fit your reporting calendar is how good positions sometimes get destroyed.

Enforcement comes last

One school of credit treats enforcement as the first tool: miss a payment, get a notice. In commodity lending with liquid collateral that makes sense - the security converts fast and a market prices it.  In illiquid or complex assets, enforcement does three things, all in the wrong direction:

It kills the operations. A business generating cash (even if not enough) stops the day a receiver walks in. The going-concern value, often most of your recovery, is gone before any sale can close.

It hardens the borrower. Pull a legal trigger and their incentives flip to pure defence. Cooperation on asset access, information and voluntary sales collapses. A negotiated exit becomes contested litigation.

It tells the world. Enforcement is public in most jurisdictions. Suppliers tighten terms. Customers leave. Employees follow. The action accelerates the exact deterioration it was meant to stop.

That said, enforcement is often the right move when you discover fraud, when a counterparty is stripping assets, or when cooperation has genuinely failed after sustained effort. In those cases, negotiating is usually fruitless - speed is a better option.

Patience is work

Early exits often get dressed up as discipline - take the certain recovery, accept the lower number, close the file and move on. In a liquid, diversified book that math works. In a concentrated portfolio, it usually hurts.

First bids tend to arrive before anyone properly understands the position. The buyer prices in their own uncertainty and due diligence costs - both of which compress the bid.  Selling to someone who is not fully informed often means taking a bigger than necessary haircut.

The extra recovery from holding through the uncomfortable middle is real and often meaningful.  The problem is that it's very difficult to see this in advance, which makes it easy to give up when reporting pressure starts to build.

Waiting is work

Patience isn't sitting still. The time between entry and exit is for reducing uncertainty, preserving optionality and improving your position.

• Information rights: you likely have contractual access to management accounts, valuations and operating numbers. Use them.  Stay current on the numbers.
• Security hygiene: registrations lapse - ensure they haven't. Assets moved to a new jurisdictions can become unperfected. Subordination can get waived by accident. Watch it continuously and fix what broke.
• The management relationship: they're your information source, sometimes your partner in the exit, often the key to going-concern value. Be purely adversarial only when it has to be.
• The capital structure: new creditors coming in above or beside you change the recovery math. Understand this early so you're not caught in inter-creditor litigation down the road.

When speed wins

If you sense that assets are being moved or sold, act fast.  Fraud, once found, warrants aggressive action. Sometimes windows genuinely close if you don't take them: a sector recovery, a brief bid in an otherwise illiquid name.  Take any path to liquidity seriously, but make the decision with clear eyes.

The skill is telling these situations apart from the ordinary discomfort of sitting with a difficult position. Not all of the urgency is coming from the asset.  A lot of it comes from fatigue, distraction or the extra reporting burden the position may create.

The honest floor

Time doesn't fix everything. Some positions never resolve unless you take action.  The job includes spotting it early enough to limit potentially avoidable damage. Liquidity clocks do run out. Counterparties who don't engage after sustained effort don't suddenly start. Jurisdictions with unreliable courts don't suddenly improve.

Holding through continued deterioration in the hope of a catalyst that never arrives on its own is an error. Hope is not a strategy.

Our framework is simple: exits should happen because the facts warrant them, not because of discomfort.