UK: Expansion of the coronavirus loan scheme: what does it mean for my business?

The launch of the Coronavirus Large Business Interruption Scheme (CLBILS) is a welcomed addition to the Government’s initial support package. The aim of this scheme is to:

  • Bridge the mid-market gap and support businesses with >£45m annual turnover
  • Clear the way for Private Equity (PE) backed companies to access additional debt support. Note - support has been extended to PE portfolio companies under the Coronavirus Business Interruption Loan Scheme (CBILS)
The headlines of the scheme are as follows:
  • The scheme offers three-year debt facilities with the amount of support available banded into two tiers:
    a) £25m in support for those with turnover between £45m and £250m
    b) £50m for those with turnover above £250m

  • The mechanics of CLBILS reflect the original CBILS, whereby loans are provided by approved lenders, supported by a government guarantee of 80% (of outstanding balances)

Whilst the headlines are attention-grabbing, there are a number of significant considerations that shareholders and borrowers should be aware of and, in some cases, ready to address:

  • PE companies are eligible as the turnover criteria is now focussed on the actual trading entity rather than at the fund level. There are, however, a number of financial tests which need to be undertaken which, unfortunately, are not too accommodating when looking at a typical UK PE-backed scenario
  • Any facility will be provided on a pari passu basis with existing senior debt, or super senior debt if applicable. This will mean more complex conversations and care should be taken in a multi-bank facility where one or more of the lenders is not accredited to provide CLBILS support
  • Given the fact that the loans will benefit from state-backed guarantees, we expect pricing on these facilities to be competitive. Up to 20% of additional monies can be used to refinance existing facilities but do incorporate restrictions on paying dividends, which may be particularly challenging for UK subsidiaries of overseas parents
  • “Investment-grade” businesses will have the choice of CLBILS or issuing commercial paper under the COVID Corporate Financing Facility (CCFF) scheme. We would expect them to use the CCFF as it is proven and currently much simpler to access (entities cannot access both schemes)


Whilst this additional initiative is attractive, it could never be a simple generic option given that the entities it is targeting will have bespoke shareholder arrangements and debt capital structures. Funders are equipped to deal with complex situations but the volume of these means that they will remain under severe pressure.

Our advice is therefore as follows:
  1. Ensure requests are well thought through and cover key elements such as performance pre-coronavirus, justification for the level of support together with actions already considered, and forecast demonstrating affordability in the post coronavirus environment
  2. Submitting a “bank-friendly” application supported by necessary information will improve the chances of gaining speedy support
  3. Analysis of the financial metrics required to access this support has to be undertaken. These are under constant review so please seriously consider taking specialist advice
  4. Consider existing lenders. Additional debt will have an impact on their structural position and their support is critical

The above is a little more complicated than detailed within the launch however we stand ready to assist.

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