Ashurst Global Loans UK Market Update: Liquidity is key
Patience, common sense, flexibility but above all communication.
If borrowers and lenders talk to each other it's going to be a whole lot easier.
This is the message we kicked off with in this series of updates and nothing has occurred in the last 6 or 7 weeks to change that view. All that being said the key message I would like to leave with you is about the importance of liquidity above all of the other factors we have talked about.?
There is little doubt that 2023 will be a challenging year for many loan market participants, be they borrowers, lenders or advisors. We are going to see some stress and with stress comes a need to get round a table and talk things through. Old fashioned sleeves rolled up style negotiation – maybe another echo of the seventies after an energy crisis and a plethora of industrial action..…
As discussed over the past few weeks:-
·?????we will see increased innovation, with products such as the forward start facility making a comeback
·?????pricing and tenors will come under pressure especially in certain sectors
·?????covenants, often a huge negotiating issue, may need to be waived, reset or revisited
·?????markets will become more domestic, continuing a trend seen since the global financial crisis in 2008/2009 and…
·?????….relationships will be key and need to be two way
All of the above points are key to how the market evolves in 2023 but the one factor that has and always will be the most important is liquidity.
The need for and provision of liquidity underpins everything we have talked about in the last 6 weeks. Cash is undoubtedly king and access to liquidity remains crucial to a borrowers' capital structure not least because it both pays the bills and underpins access to longer term debt.
When I talk about the 4 key pillars of any loan market deal – price, tenor and controls are important but liquidity is fundamental.??
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My advice remains: pay an extra few basis points if needs be, sacrifice a year in tenor, negotiate a well-balanced and sensible covenant package if all of this gets you the liquidity you need.
Ashurst UK Global Loans is at the heart of the loan markets, be they leveraged, corporate, real estate, infrastructure or fund related. Please do give us a call.?????
Finally I would like to wish you all a very merry Christmas and a prosperous 2023.?
Let’s take on whatever challenges it brings.?
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This is the final article in a series of 7 looking at the challenges the loan markets face in 2023 – please see below for links to the first 6 articles.