by Danny Andropoulos, Director

It is very likely that the COVID-19 pandemic will result in financial distress for many businesses. Insofar as such businesses are financed by bank debt, it will be advisable for such businesses to closely consider their obligations under the finance documents governing such bank debt with particular consideration to be given to financial covenants and debt service obligations. If it is reasonably anticipated by such businesses, that the prevailing circumstances are reasonably likely to result in either financial covenant breaches or an inability to fulfil debt service obligations, it is recommended that proactive engagement be undertaken with the relevant debt providers/banks, in order to (i) provide accurate, up to date financial information and projections, (ii) negotiate (a) a relaxation or reset of financial covenants, (b) a forgiveness of any breach of financial covenants, which is likely to occur and (c) where appropriate, a moratorium on the servicing of interest and/or a rescheduling of interest and capital repayments. The emphasis on early engagement with lenders in such circumstances cannot be over-emphasised.