Echo Base, a privately funded special
situations platform that acquires, finances and advises companies across
digital asset markets, today announced the formation of Echo Base Restructuring
(“EBRx”), its restructuring and crisis advisory line. EBRx works with
founders, principals, major shareholders and boards in the period before and
after a disruptive event, when the earliest decisions, often taken with limited
information, set the range of outcomes.
EBRx advises on matters including liquidity
shortfalls, funding gaps, covenant and maturity problems, failed financings,
counterparty defaults, suspended withdrawals, frozen or seized assets,
regulatory and enforcement action, license loss, forced jurisdictional exit,
litigation, control contests, deadlock, founder separations and shareholder
disputes. Echo Base engages where a viable operating core has been overtaken by
an event, a dispute or a financial problem, rather than where the underlying
economics or business model never worked.
A restructuring compresses decisions that
would normally take a year into a few weeks. Most are irreversible, and they
are taken before the company knows what it is facing. Despite a decade of
insolvencies, shutdowns and enforcement actions, the digital asset sector has
not developed the essential professional infrastructure that surrounds distress
in other markets. Operators reach their first crisis without anyone at the
table who has been through one.
Echo Base has led contentious negotiations
across multiple jurisdictions, alongside concurrent litigation, and through
capital structures where each group of claimants recovers differently and knows
it. The situations are delicate: a lender that needs to hold off, a creditor
group that has organized, an exchange or counterparty holding the company’s
assets, or a shareholder whose consent a financing depends on. Where a dispute
or a broken relationship has made direct contact between the parties difficult,
Echo Base acts on the company’s behalf.
Echo Base typically steps in as the lead
advisor to the chief executive or the board, a role often called chief
restructuring advisor, for the duration of a situation. It sets strategy,
sequences decisions and leads distressed M&A and financing discussions
while management continues to run the company. The seat can be external, where
stakeholders want reassurance that an experienced party is involved, or
entirely confidential, with Echo Base holding no public role and working
privately with the founder or the board. Echo Base selectively takes officer or
director appointments, and works alongside the company’s counsel and, where a
process is required, a restructuring financial advisor.
Echo Base Recovery, the firm’s asset
administration platform, is available to be appointed separately when a company
ceases operating. It assumes custody control, reconciliation, claims
administration and wind-down.
“In every restructuring there is less
value than there are claims against it, and how that gets divided is usually
settled in the first two weeks, before anyone has run the numbers,” said
Roshan Dharia, Chief Executive Officer of Echo Base. “A company suspends
withdrawals, puts out a statement, pays one claimant ahead of another, and by
the time advisors arrive the leverage is gone and the record is working against
them. We are usually the counterparty across the table in these situations. We
know what the other side does next because that is where we regularly
sit.”
“A company in this position will
retain counsel, and where a process requires a financial advisor, it should do
both,” Dharia added. “But that takes weeks, needs a defined mandate,
and typically results in an announcement that catalyzes a more intense wave of
scrutiny with a new set of decisioning. The decisions that determine how smooth
or painful the process ultimately becomes get made before any of that exists,
usually by a founder at midnight with incomplete information and nobody to call.
We take that call.”
EBRx is led by the same investment,
operating and restructuring team that executes Echo Base’s own transactions. It
has been the creditor, the acquirer and the counterparty in these situations,
and that is the basis for its judgment about what the other side will accept.
Echo Base acts as a principal through its investment strategies and as a
trusted advisor through EBRx, which lets the company selectively deploy
flexible, stabilizing capital where the situation calls for it. This
intersection of capital and restructuring knowledge is where Echo Base excels
as the lead professional navigating the distressed digital asset landscape.
About Echo Base
Echo Base is a privately funded special
situations platform that acquires, finances and advises companies, founders and
boards across digital asset markets. The firm combines distressed investing
expertise with deep operating capability, allowing it to intervene where both
the capital structure and the operations require coordinated action. Echo Base
invests through Echo Base Opportunities and Echo Base Finance, and advises
through Echo Base Restructuring and Echo Base Recovery. For more information,
visit eb.global.
This article was written by IL Contributors at investinglive.com.