Welcome to this ACT webinar
17
@ACTupdate #ACTwebinar Welcome to this ACT webinar Practical steps to best position your business 17 June 2020 | 13:00 – 13:45 BST Practical steps to best position your business
Transcript of Welcome to this ACT webinar
@ACTupdate#ACTwebinar
Welcome to this ACT webinar
Practical steps to best position your business
17 June 2020 | 13:00 – 13:45 BST
Practical steps to best position your business
@ACTupdate#ACTwebinar
Interactive widgetsPlease take a minute to familiarise yourself with the widgets on your screen. They can be moved around the screen and maximised/minimised to suit you.
Click on the help widget if you experience any technical difficulties during the webinar.
Download resources during the webinar by clicking on this widget.
Submit your questions to our speakers throughout the webinar by using the Q&A widget.
Please take a few minutes at the end of the webinar to provide your feedback.
Agenda
@ACTupdate#ACTwebinar
ModeratorNaresh Aggarwal Associate Director – Policy & TechnicalACT
SpeakersKristen Roberts Partner, Head of Corporate DebtHerbert Smith Freehills
Gabrielle Wong, Partner, Finance Herbert Smith Freehills
Rachel Pinto Partner, Pensions Herbert Smith Freehills
Kevin Pullen Partner, RTI Herbert Smith Freehills
COVID-19ACT Webinar - Practical steps to best position your business17 June 2020
// 5
COVID-19ACT and HSF Webinar - Practical steps to best position your business
Accessing existing and new credit facilities
Preserving cash and improving working capital
Impact on supply chain and creditor behaviour
Accessing existing and new credit facilities
Kristen RobertsPartnerT +44 7851 382 [email protected]
Gabrielle WongPartner T +44 7701 004 [email protected]
// 7
New financings - navigating new and existing routes to additional debt including government funding (CCFF, C(L)BILS)
New Sources of Liquidity• Government Schemes: CCFF, CLBILS, CBILS and
Future Fund• Lender Credit Processes and the trend towards more
burdensome economic and documentary terms as well as weighing the balance on short vs longer term financings
• Bank facilities • US Private placements and DCM
• Accordion and Extension Options• Refinancings and the return of one year extension
options
Managing Existing Debt Arrangements• COVID Waivers and the price for consents – Bank
Debt and USPP• Bilateral liquidity facilities and local (non guarantor)
facilities• Committed vs uncommitted facilities• Proactive compliance monitoring, particularly
local/ancillary facilities
Preserving cash and improving working capital
Kristen RobertsPartnerT +44 7851 382 [email protected]
Rachel PintoPartnerT +44 77 3009 [email protected]
// 9
Preserving cash and improving working capital
Preserving cash and improving working capital• Receivables financing transactions, points to consider • What is a non-recourse receivables sale ?• Dealings with counterparties: extending payment terms and accessing supply chain
financing• Testing trapped cash• Deferring pension contributions
// 10
Preserving Cash – Pensions What are we seeing?
Coverage, covenants and default
Defined Benefit Schemes:• Deferring deficit repair contributions – requires
negotiation with trustees• Explain rationale and provide supporting
information• Information sharing during deferral period• Pensions Regulator guidance• Deferral for a limited period• Equitable treatment with other creditors• Contingent security?
• What will trustees want to know?• Continued support from banks and other
lenders • Dividend payments stopped• Intra-group transfers – only if essential• What other steps are being taken to preserve
cash?• Switch on mechanism if cash flow improves more
quickly than anticipated?• Check that approaching trustees will not be a default
event under banking facilities or security arrangements• Don’t forget scheme expenses
Other options for reducing pension spend:• Reducing employer pension contributions for
furloughed employees• Auto-enrolment minimum• No employee consultation
• Reducing employer contribution rates for all staff• Employee consultation• Check scheme rules• Check contracts of employment
• Closing defined benefit scheme to future accrual• Employee consultation• Negotiate with trustees?
• Postponing automatic enrolment and re-enrolment
Future negotiations with trustees• Impact of Corporate Insolvency and Governance Bill
• More reluctant to defer contributions?• Greater emphasis on security?• Tougher approach from the Pensions Regulator
on deferring deficit repair contributions?
Impact on supply chain and creditor behaviour
Kevin PullenPartnerT +44 7771 917 962 [email protected]
// 12
Impact on supplier and creditor behaviourCorporate Insolvency and Governance Bill
Anticipated changes in Behaviour• Potentially limited impact on banks and financial institutions – debt
must be paid as it falls due; standstills and waivers likely to remain a usual tool
• Supplier threats re statutory demands and winding up petitions for non-payment weakened
• In a moratorium or an insolvency a supplier is unlikely to be paid pre-petition debts but cannot terminate for non-payment and must continue to supply on the same terms
• Suppliers likely to examine terms• Seeking payment in advance or on account• Specifying rolling termination dates • Reservation of title• Guarantees from affiliates• Converting unpaid invoices to loans to gain priority?
• Consequences likely to be seen throughout the supply chain –each supplier in the chain making similar changes; each supplier impacted by non-payment
• Can only terminate a contract with the consent of the court
Factors to consider:• Financial institutions may require moratorium to gain priority
status• Restructuring Plan cross class cram down may result in gaming
between creditors – could a junior stop a senior enforcing? Can dissenting landlords be ignored?
• Risk of non-payment culture
A new restructuring plan permitting cross class cram down if 75% of economically interested class approve the plan. Potential to cram out shareholders and junior or unsecured creditors
Restructuring Plan
New moratorium process creating debtor in possession concept. Limited ability to pay pre-moratorium debts. Suppliers cannot terminate contracts for non-payment and must continue to supply on same terms
Moratorium and Ipso Facto
Temporary - No winding up petitions may be presented before 30th June unless (1) COVID19 has not had a financial effect on the company or (2) the insolvency would have occurred irrespective of the covideffect
Suspension of winding up petitions
Problems for directors:• Relaxation of wrongful trading and personal liability for wrongful
trading• But other directors duties not relaxed (often easier to sue a
director for breach of duty)• Problems of priority post moratorium – as drafted the Bill ranks
“lending and financial services” debt above all other debt including floating charges for a period following end of moratorium. Unless changed pension deficits will be subordinated to those claims – likelihood of increased threat of contribution notice
• Supply chain credit issues impacting own business
// 13
Further Discussion and Q&A
www.hsf.com
The contents of this presentation, current at the date of this document, are for reference purposes only. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication. Herbert Smith Freehills LLP and its affiliated and subsidiary businesses and firms and Herbert Smith Freehills, an Australian Partnership, are separate member firms of the international legal practice known as Herbert Smith Freehills.© Herbert Smith Freehills LLP 2020
Find out more:
Q&A
@ACTupdate#ACTwebinar
ModeratorNaresh Aggarwal, Associate Director – Policy & TechnicalACT
SpeakersKristen Roberts, Partner, Head of Corporate DebtHerbert Smith Freehills
Gabrielle Wong, Partner, Finance Herbert Smith Freehills
Rachel Pinto, Partner, Pensions Herbert Smith Freehills
Kevin Pullen, Partner, RTI Herbert Smith Freehills
UPCOMING ACT EVENTSACT Festival of Treasury Transformation 13 – 16 July 2020 | A Virtual Event
ACT Annual Conference6 – 7 October 2020 | Harrogate
ACT Middle East Treasury Awards 8 November 2020 | Dubai
ACT Middle East Treasury Summit 20209-10 November 2020 | Dubai
ACT Annual Dinner 202011 November 2020 | London
ACT Deals of the Year Awards14 December 2020 | London
treasurers.org/events
@ACTupdate#ACTwebinar
Thank you for joining the ACT webinar
Practical steps to best position your business
Please take a few minutes to provide your feedback
treasurers.org
