Workout Waterfall Calculator

Workout proceeds flow through a priority waterfall. This calculator distributes by priority.

Gross proceeds

Workout costs

Senior debt

Mezz debt

Preferred equity

Senior recovery

$5,500,000

Mezz recovery

$750,000

Preferred recovery

How the math works

Net proceeds after costs flow senior → mezz → preferred. Each takes fill amount; residual passes down.

Senior is almost always made whole unless deal deeply underwater. Junior tranches should underwrite for 0-30% recovery in distress — price positions accordingly at origination.

How to Use

Enter gross proceeds.
Enter workout costs.
Enter senior debt.
Enter mezz debt.
Enter preferred equity.
Read each party's recovery.

Frequently Asked Questions

Waterfall order?

1) Workout costs (legal, trustee). 2) Senior debt. 3) Mezz debt. 4) Preferred equity. 5) Common equity. Strict order; no skipping.

Typical outcome?

Senior usually recovers 85-95%. Mezz: 0-40%. Preferred equity: usually 0. Common: always 0. Junior tranches are wiped in most workouts.

Negotiation?

Junior tranches may demand hold-up payments ($100k-$500k) to avoid litigation. Sometimes cheaper than extended legal battle, but sets bad precedent.

When does a lender negotiate vs foreclose?

Lenders calculate their net recovery from foreclosure (asset value minus legal, time, and sale costs) and compare to any workout proposal. If your offer nets the lender more than foreclosure, and you present it with clear sources of capital, most lenders will engage. Bring a credible sponsor, documented sources, and a timeline — vague asks get declined. Build the relationship before distress, not after.