Ashurst Global Loans UK Market Update: Relationships under pressure?

The corporate loan market is entering an interesting phase. We have talked over the past few weeks about the various challenges facing both borrowers and lenders as 2023 approaches.

We have on occasion drawn parallels with the markets immediately following the global financial crisis back in 2008.

We have frequently discussed the need for ongoing, open and honest communication between market participants (including I would add, advisors)

At the very heart of said communication is effective relationship banking. I have had the pleasure of working with some of the best relationship managers in the business and to my mind the keys are trust and an effective two-way relationship. Borrowers need to know their bankers as well as bankers should know their borrowers. This is especially true in times of possible stress.

A borrower's core financing is the cornerstone of any relationship.?In a business as usual world, support by way of provision of loan capital or commitment is often viewed as an entry ticket to a wider relationship. Whether or not relationship aspirations are satisfied is usually a function of time and opportunity. Patience should be a lender's watchword as presumably the original decision to lend would have factored in various ups and downs in terms of ancillary business opportunities. I have rarely understood the rationale as to why a lender would decline a +1 extension 12 months after entering the loan in the first place.??

Inevitably for some it will not be business as usual next year and relationships will be tested as economic headwinds intensify. A couple of pointers from my experience of being on both sides of the market.

Lenders – please don’t push too hard on returns / ancillary business when a client has more pressing issues. Patience, support and advice is what is required.

Borrowers – please don’t try and run before you can walk when restructuring facilities after times of change – understand the lenders' need for elements of control and perhaps most importantly, information.???

As we have said, communication is key.

Ashurst UK Global Loans advises both borrowers and lenders. We have ex-bankers in the team who understand relationship banking. Please do give us a call.???