Germany: Corporate financing in times of crisis - what you need to know
The key parameters of the COVID-19 package of measures for medium-sized and large companies in Germany are now defined. The KfW special programmes enable companies to apply for low-interest financing on a large scale with terms of up to five years.
As an incentive system for the banking industry, the sufficient financing partners are granted a release from liability of 80%.
What appears to be targeted in principle, in practice, however, sometimes poses major challenges for companies applying for financing for a wide variety of reasons. If the company is also located in a sector that is subject to structural change, such as the automotive industry, mechanical engineering, trade, etc., the hurdles for a positive approval procedure are much higher.
Not only in the case of existing collateral agreements or different financing groups and instruments, companies are faced with complex requirements when integrating KfW funds.
If there are corresponding covenant provisions or only insufficient collateral, and/or if the provisions in the existing financing agreements do not provide sufficient scope for the necessary liquidity support, a company must be prepared for challenging discussions with the current financing partners. If necessary, existing collateral agreements must be opened or subordinated claims negotiated under a KfW programme. In any case, this requires close coordination of existing and, if necessary, persuasion of new financing partners.
In the current environment, banks not only feel overstretched in terms of capacity, but also have diverging interests in individual cases.
These complex issues and the urgency in terms of time present companies and their finance departments with great challenges, especially since the banks have to make comprehensive information demands on the companies in the context of credit checks.
The well-known companies we advise confirm that these comprehensive and complex issues should be professionally managed by an independent and experienced debt advisor in line with the demanding timeframe.
As Germany's leading independent financial advisory firm, we have successfully advised numerous sophisticated corporate financings with a total volume of more than €6bn in the past months alone, a substantial portion of which involved corresponding KfW programmes.
In this challenging situation, we would like to offer you the opportunity to use our expertise and experience from comparable situations to support your company in a targeted manner:
- Rapid and professional preparation of the application and support in discussions with the financing and guarantee banks
- Revision of corporate planning and derivation of short and medium-term liquidity requirements under various scenarios
- Convincing presentation of the business model and company perspective in the respective market environment
- Integration and management of existing (syndicate) banks and other financing partners including KfW
- Structuring and implementation of the financing measures
The Government support measures are an important component in the short-term and effective countering of emerging liquidity bottlenecks. Building on this, we recommend that you consider additional financing solutions at an early stage in order to identify complementary instruments and strengthen the financing structure in the long term.