Following the referendum result, there has been a great deal of discussion regarding lenders’ likely response to changing credit risks caused by the vote to leave the EU. This will be relevant to borrowers who are planning to make acquisitions or undertake refinancing in the coming weeks and months. However, will the result have an impact on all borrowers and their ability to operate on a day-to-day basis?
An immediate consequence for all borrowers caused by the Brexit vote will be the impact on lenders’ resources and their ability to conduct day-to-day lending operations. All lenders are undertaking urgent reviews of their loan portfolios on a loan-by-loan basis to assess any credits which might be affected by the Brexit vote and its knock-on consequences.
In addition, lenders are also reviewing any deals in execution stage to establish what degree of commitment to those deals they are subject to (i.e. is the lender legally bound to proceed?). Further reviews of pricing and commercial terms of deals in documentation stage are also being conducted. This is taking up a huge amount of resource at lenders, involving deal origination teams, credit and pricing committees and transaction execution and legal teams. It is being given absolute priority. The diversion of staff time to conduct these exercises is inevitably reducing lenders’ ability to process business as usual items.
We would advise that if you are contemplating any transaction which requires your lender(s) to engage with you in a significant way, you factor in additional time for the request to be processed. Lenders will inevitably be taking a more cautious view, so we would also suggest that you provide your lender with as much information as possible to justify the request. Even matters which are effectively repeats of previous requests, such as a disposal consent or lease amendment, will take extra time for a lender to process. Any requests which involve a more material approval, such as the exercise of an accordion or extension option or an approval for a substantial disposal or acquisition, will be subject to even greater scrutiny and longer time periods for review. We would advise that you engage with your lenders as early as possible and provide as much information as is available.