Renewing existing facilities or obtaining additional debt finance can be challenging. But as financing has such a significant impact on shareholder returns, it is as important as ever to understand whether terms on current and proposed facilities are advantageous or detrimental.
The dramatic changes in the market place make this difficult. On the one hand the RBNZ has eased monetary policy considerably yet on the other lenders have become more risk adverse. However, investing time in understanding the market and the terms others are securing can pay dividends when it comes to negotiating with lenders.
But if you are in the awkward position where trading conditions are making it hard to meet bank covenants when you come to renew, or if you happen to breach, do you have any choice? Those businesses that have planned ahead and are managing expectations are likely to be the ones that ensure continued support from lenders.
Considerations for renewing or establishing debt facilities
- Avoid surprises with current lenders; maintain regular dialogue and manage their expectations of trading performance.
- Put in the groundwork ahead of any negotiations and be wary of running out of time and limiting your options.
- Understand your existing bank facilities; which aspects are good and which are not? Determine whether any aspects may be negotiable.
- Make sure any forecasts submitted to support a proposal are based on sound assumptions and be prepared to explain recent performance.
- Know the current market place.
How KPMG can help
KPMG Corporate Finance can provide advice and assistance on all aspects of financing. We have wide ranging experience working for both borrowers and lenders.
- provide advice on financing from both a local and international perspective
- assist you in preparing proposals to lenders
- conduct bank lending reviews.