People often find themselves in difficult situations with lenders, sometimes for no fault of their own
If you find yourself in this situation, taking swift decisive action and partnering with professionals who understand the depth and breadth of the finance market can significantly help you navigate out of troubled waters.
Our services for distressed / workout situations include:
- Creditor Negotiations
- Debt Restructure
- Incomplete Construction
- Facility Renegotiation and Discount Negotiation
- Corporate reconstruction strategies
- Workout strategies
- Divestment strategies
- Credit enhancement strategies
- Property finance (specifically private non-bank lenders)
- Property Development Finance (for cases where the project is incomplete or there are cost overruns beyond the scope of the existing lender)
- Equipment Finance (including direct access to private non-bank lenders)
- Cash Flow & Debtor Finance
- Inventory Finance
- Trade Finance
- Equity Investors
- Venture Capital for turnaround solutions
Our unparalleled access to market participants allows us to succeed on your behalf where most others will fail.
There are various levels of distressed situations, which can be very broadly categorised from low to high level:
Typically some event has occurred which allows the funder to call up the loan and request repayment in full, or refuse to roll over an existing facility. There can be many reasons for this, such as:
- Bank has appointed a new relationship manager who does not understand or support your business
- Breach of monetary or non-monetary covenants (i.e. valuation short)
- Short-term cash flow problems have meant you have missed payments
We consider the above examples as a low level distressed situation, however the relationship with the existing lender has run its course and it is time to refinance. Refinancing early at this stage is your best option.
1. Refinance to a more understanding lender (typically a private lender)
2. Increase borrowing amount to cover cash flow needs, or restructure to allow for growth needs
3. Clean up loan repayment history to ensure credit history is back to acceptable levels
4. Refinance with a major bank in 6-12 months
Mid Level – Mortgagee in Possession
In this situation the borrower has failed to make repayments and the mortgage is in default. The lender has the ability to exercise their right to re-possess the property and sell it to repay their debt. This situation is not ideal for the borrower, as the lender is only interested in getting their money back and mortgagee sales often result in lower sale prices. It is also important to move quickly as default interest and legal fees can mount up very quickly.
- Refinance to a more understanding lender (typically a private lender)
- Increase borrowing amount to cover required cash flow
- Clean up loan repayment history to ensure credit history is back to acceptable levels, with a view to refinance back to a major bank in 6-12 months, or
- Allow for an orderly sale
High Level – Receiver appointed
Clearly when this occurs refinance is not an option, as the client has lost control of the assets and typically also the borrowing entity. Our strategy is generally to negotiate with the Receiver and acquire the debt from the lender at a negotiated discount and retire the Receiver. When that occurs refinance and restructure is an option, generally with a private funder.
- Negotiate a payout figure at a discount to the current debt
- Acquire [assign] the debt from the existing lender, including all rights associated with the senior position
- Retire the receiver
- Implement corporate restructure strategies
- Implement credit enhancement strategies (as required)
- Restructure debt to also include non-property based facilities such as cash flow, equipment and trade finance (if required)
- Refinance core debt, sale of any non-core assets (if required, to bring the debt back to a workable level)
- Ensure new structure is acceptable and refinance back to a major bank once a clear 12 month trading history has been established
If you are in any financial distress with your current facility and need assistance with a workout strategy, do not delay in addressing the situation. Call us today so that together we can discuss your options and promptly take appropriate steps.