Working together

Having now worked from home for nearly three weeks, I'm settling down into a pattern (morning walk, very short commute, log on, work, lunch, work then optional G&T/beer…). It seems to me that the debt markets are also settling down into their own patterns, at least compared to the absolute mayhem of mid-March.

The two government schemes in the UK are up and running – yes there have been teething problems and this morning's clarifications on the CBILS were welcomed, as was the new CLBILS but these are unprecedented times and regulators, banks, non-bank lenders and borrowers are all having to work at breakneck speed to try and create solutions to the liquidity issues presenting themselves.

There have been concerns over the squeezed middle at Ashurst which have been partially addressed by the new CLBILS but there are still many even larger companies who cannot access either the CLBILS or the CCFF. All that said many of these companies have access to various sources of liquidity- listed equity markets, private equity, private credit providers, non-investment bond markets (eventually), banks and no doubt in certain sectors, further government support. There will always be exceptions but unprecedented activity in the corporate bond market and the CCFF should also, in theory, free up bank liquidity for such companies.

What is very evident is that regulators have been clear that they want banks to step up and not only provide the necessary liquidity but consider issues driven by Covid 19 sympathetically. Various measures have been announced this week to reinforce the regulators position. What is also clear is that banks are dealing with an unprecedented level of enquiry and having to prioritise accordingly.

On Wednesday the Business Secretary called for banks to step up and repay the taxpayer by supporting the economy. Stephen Jones, CEO of UK Finance says ''lenders are working hard to get financing to all viable businesses who need it as quickly as possible'' I've heard some say banks should not support certain businesses – the don’t throw bad money after good argument. ALL of these statements are correct !!

At the moment all markets participants are currently, understandably, fighting fires and this may continue for some time yet. Equally as time moves on, we will see new, refreshed and innovative structures in the loan markets. We will see equity and debt working together as we did post Financial crisis and has already been seen this week, we will see have ups and downs and negotiations will sometimes be fraught – another echo of 12 years ago.

As an ex-banker who experienced the post financial crisis years (and who was and still is very grateful to the taxpayer by the way) and having spoken to both borrowers and lenders over the past 3 weeks, I am convinced that we will get through this and I would repeat my statement of two weeks ago today – the key is flexibility, respect and above all regular, honest and effective communication.

It is perhaps perceived as not as easy when working from home but as an old mate once said to me, find 15 minutes every day to talk to a client. With no time wasted commuting, I'd suggest we can all do this several times a day even if that chat isn’t accompanied by a coffee or a beer.

As ever, the global loans team at Ashurst is here to help facilitate such conversations. Please drop me a line or give me or any my partners a call