It’s been a week now since the enforced COVID-19 restrictions came into force and we don’t need to tell you about the issues everyone is facing at the moment, but we wanted to outline some thoughts on how companies might be able to manage liquidity and selectively draw down on the well-publicised government initiatives.
In the current markets short term liquidity has to be a primary focus for most businesses. It is fair to say that “liquidity is King,” so where there is a liquidity requirement, think carefully about how this money goes into the capital structure. We have useful and relevant experience of this, and we are currently working with banks on live examples and are happy to share our experiences.
From our experience, banks are supporting distressed situations when approached. Generally, there is a belief that these institutions will be difficult, however, many of the funders we are working with are using the current situation as an opportunity to enhance their own images and repair broken relationships. Corporates should use this willingness to their own advantage.
Whilst measures such as VAT breaks and some selective deferral of taxes will help to keep the lights on, and the ability to furlough staff will reduce the fear of permanently losing employees, this is not a medium-term solution.
In our view, more support is needed to assist Mid Market corporates with many of the measures aimed at larger or smaller companies. The below provides some more short-term solutions, though you should be mindful not to damage lender relationships that may be needed for future amendment discussions. We suggest keeping your stakeholders engaged and informed, recognising that they too are getting used to a totally new way of operating under the COVID restrictions.