The outbreak of the novel coronavirus (Covid-19) is having increasing global impact including loss of lives and growing disruption. Amidst this rapidly changing situation corporates, sponsors, banks and other financial institutions need to be aware of the potential financial, regulatory and legal consequences for their business. In this article we identify certain key risks arising from the Covid-19 outbreak that apply to existing and new leveraged finance structures and which may have been overlooked.
In our article on 26 February, 'The Coronavirus and Force Majeure in Supply Contracts - English Law Perspective' we considered recent cases of companies seeking to implement force majeure clauses in supply and other commercial contracts.2 English courts have consistently looked to specific force majeure provisions the most common of which are not typically included in leveraged finance documentation. The leveraged finance equivalent is the material adverse change event of default which centres on the definition of material adverse effect ("MAE").