Update on Distressed Situations Funding

Admin • August 5, 2020

An update on funding solutions for distressed situations...

During the 2008 banking crisis, our funding contact worked closely with the "special measures" departments of HSBC, NatWest, RBS and Yorkshire Banks. He recalls vividly that businesses and individuals did get into financial difficulties in 2008 but it was in 2009 and 2010 (some 18 months on) that I witnessed a tsunami of casualties. These were the businesses that had hung on for grim death but when they visited their bank for funding, because of the recent financial performance, no support was forthcoming and financial collapse was the result. Despite the government's initiatives, unfortunately there will be businesses collapsing principally because of a lack of capital. In anticipation of such events occurring this office has created the following facilities:

A Regulated Short Term Funder: This short term fund is ideal to help to annul or reverse a personal bankruptcy or vary an Individual Voluntary Arrangement.

Flexible Secured Funding: Funders who will provide funding secured upon personal and business assets be it first or second charge to enable financial restructuring.

Sale and Lease Back: Very often the fixed assets of a business have good value but are tying up working capital. In turn this office is able to arrange sale and lease back of such assets to stabilise a business.

Equity Funding: Many businesses that survive an economic crisis have financial difficulties as their order book begins to expand back to pre-crisis levels. The business has excellent prospects and the projections are encouraging. However, because of the recent economic crisis, the recent management information is insufficient to justify bank support. In such circumstances equity funding can be arranged from £100,000 to £20 million to support such businesses.

Assets of Business in "Transition": A global fund with whom we have access will, in certain circumstances, provide funding from £30 million to £250 million to stabilise the situation. What are these circumstances and when is an asset or business in transition?

• A development project that runs out of funding.

• An investment property where the tenant is not going to renew and will leave the property empty and the landlord in breach of banking covenants.

• A landlord without the working capital to carry out essential property refurbishments.

• An investor/landlord has a succession plan issue and has reached an age where he/she wants "out".

• An asset or a business which is over leveraged i.e. has too much debt on the balance sheet.

• An asset or business in breach of banking covenants. What type of securities would be eligible?

• Large apartment/student accommodation developments.

• Office block.

• Hotels.

• Nursing home group.

• Leisure parks. Our contacts within the global fund will step in, stabilise the situation, add value and then move on in 3 to 5 years.

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