Financing Briefing - Corporate Financing in troubled times

The tightening of bank credit has an impact on the wider economy. Debt advisory groups at banks and accountants have been reporting increased activity. What began as covenant stress has, for some companies, mutated into waiver requests, work-outs and worse.

Commentators are already predicting that even the most stable companies will find it difficult to raise new money from banks to pay off existing debts for the foreseeable future. Market intelligence suggests that a large proportion of corporate debt will mature in the coming 24 months, forcing companies to raise finance in very difficult circumstances.

Borrowers are already facing significantly tougher terms and for some, bank debt may not be available. As trading for many corporates deteriorates, technical defaults are likely to become increasingly common at a time when banks are trying to de-risk their own balance sheets.

This briefing highlights some of the legal issues corporate borrowers should be aware of and considers the steps which can be taken to mitigate problems which may lie ahead for some.

Andrew Balfour (partner), George Seligman (partner)