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Loan debt - planning for a refinancing

Insight

Business banking

In the face of rising interest rates, high inflation (including rising energy prices), falling consumer confidence and the unstable economic outlook, businesses across a variety of sectors are finding it increasingly challenging to manage their debt capital structures.

Looking at bank lending, often the most common form of debt finance, businesses with floating rate loans are facing higher borrowing costs (in turn adversely affecting cashflows), while even those that benefit from fixed rates face financial headwinds that are likely to impact their ability to service their debt. This particularly applies to businesses that borrowed heavily to help them manage the impact of the COVID-19 pandemic (such as those in the hospitality sector).

Once again, those businesses need to review their funding arrangements and, where appropriate, consider their restructuring options, including refinancing and consolidation.

Refinancing or consolidating (which means combining two or more loans from the same or different lenders into a single, larger loan from one lender) existing loans can allow businesses to:

  • Move to fixed rate products, offering greater cashflow certainty,
  • Amend the terms of their debt to provide increased covenant headroom, reducing the risk of a breach and the potential for a lender to demand repayment before the debt matures,
  • Agree more manageable payment structures (eg by adjusting payment profiles to fit a business’ expected cashflow forecast in the near to medium term), and
  • In the case of consolidating, reduce the administrative burden on the business of servicing, and complying with the obligations under, multiple loans.

Farrer & Co’s leading banking practice has established a strong reputation for advising business clients in a range of sectors, including in media, sports, retail, healthcare, education, charities, hospitality and leisure sectors. Our team is available to support businesses that are considering their debt restructuring options, providing top quality advice that allows our clients to confidently make decisions that best suit their needs.

If you require further information about anything covered in this briefing, please contact Simon Graham, Graham Dunn or your usual contact at the firm on +44 (0)20 3375 7000.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, October 2022

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About the authors

Simon Graham lawyer photo

Simon Graham

Partner

Simon is a member of the firm’s banking team, delivering expert advice to both borrowers and lenders. An acknowledged expert in real estate finance and the private placement of bond issues, Simon advises clients on all types of debt financing arrangements including art finance. Simon’s clients include private & international banks, individuals, private estates, privately owned businesses, schools, charities, Oxbridge colleges and livery companies. He has huge experience advising trustees, both corporate and individual, and lenders to trustees. He has established long-term relationships with clients across these sectors and loves problem solving – finding innovative solutions to various financing challenges.

Simon is a member of the firm’s banking team, delivering expert advice to both borrowers and lenders. An acknowledged expert in real estate finance and the private placement of bond issues, Simon advises clients on all types of debt financing arrangements including art finance. Simon’s clients include private & international banks, individuals, private estates, privately owned businesses, schools, charities, Oxbridge colleges and livery companies. He has huge experience advising trustees, both corporate and individual, and lenders to trustees. He has established long-term relationships with clients across these sectors and loves problem solving – finding innovative solutions to various financing challenges.

Email Simon +44 (0)20 3375 7141
Graham Dunn lawyer

Graham Dunn

Senior Associate

Graham acts on a broad spectrum of financing transactions, with a particular focus on advising clients on domestic and multi-jurisdictional secured and unsecured lending transactions. He has transactional experience acting for both borrower and lender clients, including banks, corporates, debt funds, trustees, sports bodies and associations, charities, livery companies and private individuals, reflecting the variety of the firm’s client base. Graham's experience, along with his proactive and diligent approach and his ability to work closely with clients and other teams across the firm, ensures that clients receive advice that is tailored and focused to meet their needs.

Graham acts on a broad spectrum of financing transactions, with a particular focus on advising clients on domestic and multi-jurisdictional secured and unsecured lending transactions. He has transactional experience acting for both borrower and lender clients, including banks, corporates, debt funds, trustees, sports bodies and associations, charities, livery companies and private individuals, reflecting the variety of the firm’s client base. Graham's experience, along with his proactive and diligent approach and his ability to work closely with clients and other teams across the firm, ensures that clients receive advice that is tailored and focused to meet their needs.

Email Graham +44 (0)20 3375 7095
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