Zerobridge’s Note For Companies Struggling Under COVID-19
By Will Elton, Date published: 2020-04-13
The COVID-19 pandemic has unleashed a wave of global volatility. It is evolving rapidly and impacting everyone as people come to grips with how to continue their businesses whilst at the same time protecting their family’s health as well as that of co-workers, employees, customers and the public at large. The disruption to end demand for many businesses has been immediate and severe.
Companies in sectors associated with travel, hospitality, F&B, retail and consumer goods have been particularly hard hit – from manufacturing, sales and marketing to services. Many companies may find themselves in financial difficulty and will need help to maintain and increase liquidity to get through this period of instability, especially with limited visibility on when things will normalise.
Debt markets have not been immune to the volatility. Many institutions are not fully staffed or acting responsively to client’ needs. Global investment banks have instituted restrictive policies on new deals and underwriting. Many fund investors are more focused on managing existing portfolios versus looking to deploy new capital and, of course, yields across the board are higher than a mere four weeks ago. In Asia, the problem is more acute as there is a lack of depth in the financial advisory and alternative capital space.
At Zerobridge, we have been busy helping clients understand what this means for their short and medium term financing, liquidity and liability management strategies. Our key messages are:
- Engage with banks and lenders early. Don’t wait – the line for help is only getting longer
- Focus on amending and extending existing facilities – proactively reach out to existing lenders with well thought out solutions
- Don’t lose control of the process, keep your discussions with the relationship team who know you best
- Resolve issues before lenders put you on a watch list which can reduce credit lines and move you to the restructuring group
- Keep bank lines, trade finance facilities, loan facilities and other liquidity available
- Start working now on refinancing upcoming debt maturities over the next 12 months so that you are ready when the financing markets open up
- Start dialogue with new capital providers so that you have multiple options if you need liquidity – funding options remain available!
- Don’t go in alone. Work with highly experienced Advisors who have experience in negotiating with lenders
Companies need to keep focus on the end goal of getting their business back on its feet, avoid extreme outcomes such as bankruptcy or emergency equity raises at depressed valuations. The key is to survive the short-term volatility and be ready to come out strong when the economy re-bounds, as it always does.
If you need help or even just real time updates on the market situation, please reach out and speak to us. Our senior team has valuable experience navigating multiple credit cycles in Asia and are here to support them during this time. We can quickly health-check your business and capital structure and look for solutions from liability management to raising new capital – quickly and efficiently.
This article does not constitute legal advice.
The opinions expressed in the column above represent the author’s own.