Welcome to the Spring 2020 edition of the Corporate Debt update
Having navigated the uncertainty created by Brexit and the recent general election, Covid-19 is now presenting a new challenge which is dominating the global and domestic agendas.
We lead this edition with an article looking at Covid-19 from a funding and restructuring perspective. As we have already seen, the scale of the pandemic looks set to disrupt many sectors, at the very least in the short-term. Of course, corporates have been considering liquidity and their funding arrangements to ensure they are able to weather this storm.
The article examines the possible impact of Covid-19 on funding arrangements, highlights what lenders and borrowers should be looking out for and offers pragmatic suggestions for the uncertain future ahead. We also look at the measures introduced by the UK Government (including in the now distant Budget 2020) which, together with Bank of England's two interest rates cuts, down from 0.75% to 0.1%, seeking to ease the short-term economic impact of the pandemic. Click here to read this article.
Following on from our last edition in which we examined the likely return of Crown Preference and the impact on the order of payments in an insolvency event, the Budget 2020 confirmed the reintroduction would proceed albeit that it would be pushed back until 1 December 2020. Lenders should also be aware that the "prescribed part" set aside from any floating charge for unsecured creditors on an insolvency will increase from £600,000 to £800,000 with effect from 1 April 2020.
As many were expecting, the Budget 2020 also announced an immediate cut back to entrepreneurs' relief. The relief reduces the capital gains tax rate to 10 per cent. on qualifying gains if certain conditions are met. As from 11 March 2020, the lifetime limit on qualifying gains to which the relief applies has been reduced from £10,000,000 to £1,000,000. If you have any queries on the Budget 2020 please do reach out to your AG contacts. Sector specific summaries of the Budget 2020 have also been published on our website and social media pages.
Prior to the outbreak of Covid-19, we hosted an event where a panel (including a debt adviser, a corporate banker, a restructuring accountant, an economist and one of our lawyers) gave their predictions of the market trends for corporate debt in 2020. In our second article, we look back at sentiment at that time, which includes themes that will remain relevant to the hoped for 'bounce back' in transactional activity. Click here to read this article.
Finally, we finish this edition with an update on the transition from LIBOR. Although now taking account of Covid-19, the Bank of England's Risk Free Rate Working Group is largely seeking to keeping to its target timetable and is now encouraging funders to cease issuing LIBOR-linked cash products by the end of the first quarter of 2021. We expect to see the market moving further to implement alternative rates despite the challenges surrounding the transition that still remain. Click here to read this article.