The importance of sound advice amongst rapidly changing debt markets

Finance business team doing analysis

Debt markets are reacting rapidly to macro events, whilst uncertainty in the market is impacting lender decision making. This means it’s even more important to prepare correctly and employ ‘deal craft’, in securing successful debt transactions.

Change is the consistent theme

It’s critical that business plans are suitably stress-tested before they hit a lender’s inbox

The last few weeks and months have seen enormous change in the economic environment; the continuing war in Ukraine; unprecedented rises in inflation; and rapidly increasing Bank of England base rate forecasts, not to mention multiple changes and U-turns in UK government policy and personnel.

Reactions from lenders have been both conservative and unpredictable in terms of decision making, as they seek to manage a more uncertain risk environment. It’s critical that business plans are suitably stress-tested before they hit a lender’s inbox, to ensure a debt proposal ticks the right boxes.

Liquidity remains strong and funding sources varied

Comparisons with the Global Financial Crisis in 2008 have been made by some, but the funding landscape facing UK businesses is now very different. Liquidity is strong, banks are well capitalised and non-bank lenders raised over €35bn in 2021 in Western Europe. This capital needs to be deployed to generate a return, fuelling investment demand.

Fund managers can’t take a sustained break from the market, due to the way their returns on committed funds work. Businesses that demonstrate sound fundamentals (track record of profitability, revenue visibility, margin sustainability, strength of cash flows), are still able to access debt capital on attractive terms.

Borrowers must now consider a broader range of potential funding partners, as options are much more varied in number and type. This unprecedented range of funding options available to businesses is good news but requires careful navigation. Capital is out there for all viable business plans, but borrowers need to understand which options are appropriate for them. Working with an adviser with the relationships to execute your goals, as well as matching risk profile with funder, pricing and terms, is essential.

International Debt Advisory team experienced an impressive six months, raising €3.4bn funding across 25 completed transactions

Expert advice is essential

The debt markets are changing rapidly, with debt now harder to source and often more expensive. Preparation, market knowledge and deal craft have never been more important.

Clearwater International received more than 150 separate items of feedback from debt providers in the last three months, from more than 50 lenders in the UK alone. The team have the most up to date information on how different lenders are behaving with deals, as well as the relationships and track record to deliver successful transactions for clients.

The international Debt Advisory team have experienced an impressive six months of deal activity, raising €3.4bn funding across 25 completed transactions in the first half of this financial year.

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