As a banking and finance lawyer, with over 20 years’ experience, I’ve never witnessed anything like this before. No one has!
The banking crisis in 2008, and the subsequent global recession, was very different. The “Tech Wreck” of the early “noughties,” when the dot com bubble burst, was different again. And, the recession in the early 1990s just shows my age!!
But, while the fall-out from this coronavirus pandemic has been rightly labelled as unprecedented, many lessons have been learnt from past crises – which are all proving helpful at this particularly difficult time.
Credit committees, relationship directors, lending & securities teams, banks’ treasury teams and corporate management teams have built up a wealth of knowledge from shared experiences. And, they now have a huge desire to collaborate and work positively together.
In my day-to-day work, as Head of the Banking and Finance team at Hugh James, I’m seeing a collective effort across the sector. And, that’s the big difference about this crisis. Everyone’s working together.
The Banking and Finance sector response to COVID-19
Banks sit at the heart of our economy and access to liquidity. They are at the frontline of the Government’s coronavirus rescue plans. So, the finance sector is really busy at this crucial time, trying to deliver on the rescue plans.
Our clients – both lenders and borrowers - are working really hard to top up loan facilities, adjust and/or postpone financial covenants and maximise all the opportunities there are for the Coronavirus Large Business Interruption Loans and Coronavirus Business Interruption Loans. It really is all hands to the deck to help out.
Businesses have either experienced cash constraints immediately or are predicting constraints by January 2021 - and debtor days are getting longer.
As lawyers, supporting the sector, we’re working in a number of key areas. We’re helping to restructure existing debt; topping up existing loan facilities; remodelling financial covenants and repayments and reworking general undertakings in loan agreements.
We’re also working on refinancing facilities. The ‘normal’ transactions for acquisition finance M&A, real estate finance and corporate finance are mostly on hold.
I and my team have built up years of experience in the key areas that our clients need at this time. This includes restructuring loans, extending repayment dates, remodelling financial covenants, executing variation letters and amendment & restatement agreements, increasing loan amounts, and building in new (or increased) working capital facilities.
Weathering the storm
If people and organisations are looking to boost their resilience at this time, my advice is simple: Plan, plan and plan again: Plan ahead to assess cash flow, income, capex and collecting receivables. I’d say make sure you have the best-presented applications for any interruption loan or top-ups.
To lenders and borrowers, I’d say use your advisors. If you’re a business, stay close to your bank’s relationship director and if you‘re a bank relationship director, stay close to your customers.
It’s simple, but important stuff.
About the Author:
Dominic Partner and Head of the Banking and Finance team at Hugh James.
He’s a vastly experienced banking and finance lawyer who, since joining Hugh James in 2010, has grown and developed the banking team into a leading player, acting for high street banks, challenger banks, financial institutions and building societies on a full remit of banking issues.
Dominic has a very broad range of expertise which spans corporate banking, real estate finance, development finance, acquisition finance and renewable energy finance. His wide range of experience built from his time in the City and whilst on secondment to a major investment bank.
Dominic takes the leading role on a number of matters and is the relationship partner for several of the team’s most important clients, and is the firm’s LMA contact. Dominic regularly advises lenders, borrowers and investors on bilateral and syndicated debt finance, private equity, asset finance, development finance and structured finance transactions, security and intercreditor matters nationally, in the City of London and across Europe.
Dominic is instructed by a range of financial institutions from high-street lenders to challenger banks and also advises public sector clients on large value complex commercially and politically sensitive matters.
Dominic has extensive experience of advising commercial lender clients on large scale loan agreement drafting services and security taking functions using bespoke secure portals. This is a unique service blending legal advice with legal process management on commercial loans.