FY2020/21 in review

In the first year of the pandemic the first quarter was noticeably quiet, but since May 2020 the volume of transactions has continued to increase rapidly and by March 2021 were the highest I have experienced in a number of years.

It has of course been a year of refinances, covenant resets, amendments and waivers, the provision of CBILS, CLBILS and loans through the Winter Sports Programme and dealing with the fast approaching demise of LIBOR.

Experian MarketIQ reported a 300% increase in the number of UK businesses taking on new debt or refinancing existing facilities throughout 2020.

There has though also been plenty of acquisition finance driven transactions in the period from September onwards. Time will tell if this is a trend that will continue or if it is due to pent-up demand. Experian research highlighted that Gateley was once again the UK’s leading corporate finance legal adviser by transaction volume in 2020.

FY2020/21 in review

In the first year of the pandemic the first quarter was noticeably quiet, but since May 2020 the volume of transactions has continued to increase rapidly and by March 2021 were the highest I have experienced in a number of years.

It has of course been a year of refinances, covenant resets, amendments and waivers, the provision of CBILS, CLBILS and loans through the Winter Sports Programme and dealing with the fast approaching demise of LIBOR.

Experian MarketIQ reported a 300% increase in the number of UK businesses taking on new debt or refinancing existing facilities throughout 2020.

There has though also been plenty of acquisition finance driven transactions in the period from September onwards. Time will tell if this is a trend that will continue or if it is due to pent-up demand. Experian research highlighted that Gateley was once again the UK’s leading corporate finance legal adviser by transaction volume in 2020.

Our FY2020/21 deals

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Matters completed

Our banking & finance lawyers completed over 500 matters over the financial year across the national Gateley Legal team in what was an extremely challenging UK economic and financial environment.

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And what about FY2021/22?

In the March 2021 budget, the government announced a new government-backed loan scheme. The Recovery Loan Scheme (RLS) replaces the existing schemes created to support businesses during the COVID-19 pandemic: the Coronavirus Business Interruption Loan Scheme, the Coronavirus Large Business Interruption Loan Scheme and the Bounce Back Loan Scheme. After 31 March 2021 new applications for those schemes closed, with the RLS opening for applications from 6 April 2021. Under the RLS, the government guarantees 80% of the finance (for finance up to £10m), available for term loans, overdrafts, invoice finance and asset finance. Those who expect to need to access this assistance should be speaking to their lenders and legal advisors asap about what’s available to them. Due to COVID-19, businesses have transformed what they do and how they do it at a record pace. Planning for what’s next in business has never been so important. Working with legal and professional experts across our group, we have collected a range of insight, tools and guidance to help organisations to build resilience over the months ahead, to survive the challenges which the pandemic will continue to create and to thrive in the new environment beyond COVID.

By far the biggest topic on the horizon for lenders is the discontinuation of the LIBOR interest rate benchmark at the end of 2021. Banks have been including increasingly detailed provisions for smoothing the switch of sterling loans to SONIA towards the end of Q3 and by the end of the year we can expect to have seen huge volumes of legacy contracts moved across to SONIA. With the 31 March deadline for ceasing new LIBOR loans having passed, day-one SONIA loans will become standard. The methodology for calculation is a lot more complex than the LIBOR term rates and there are still a number of considerations where a market approach has not yet crystallised. It is particularly important for businesses borrowing to ensure they understand the impact of the changes their lenders are requiring. In the SME market, we are likely to see a move towards a greater use of base rates. However, with the spectre of negative rates we can expect minimum rates – floors – to be required as standard.

Asset-based lending is facing a continued squeeze on inventory facilities as a result of the improved status of HMRC with the re-introduction of Crown Preference at the end of last year – with taxes taking priority over floating chargeholders and unsecured creditors on the insolvency of a business. When coupled with the permitted extensions on payment deadlines by HMRC as a result of COVID-19, the impact is expected to be even greater than initially anticipated as companies are more likely to have higher levels of unpaid tax. This could impact businesses light on fixed assets that rely on this type of funding, a particular concern in the SME market.

On 31 December 2020 the Brexit transition period came to an end, requiring fundamental changes to the way companies manage their workforces, international distribution networks and regulatory compliance. It remains to be seen what the full impact of this huge change will be but one thing is certain, organisations will need to continue to take action in respect of business after Brexit. With continued uncertainty about exactly how the EU-UK financial services relationship will take shape, businesses trading across borders may see restrictions on bringing companies in EU jurisdictions within group facilities.  

Environmental social and governance issues are also playing an increasingly important role in all aspects of business. As businesses look to reduce their environmental impact and become more sustainable, we expect to see an increase in the prevalence of Green Loans and Sustainability Linked Loans funding new projects and targets, helping businesses tackle climate issues and promoting positive change.

Keep scrolling to see some of our banking & finance deals completed throughout FY2020/21.

Our year in Acquisition Finance

We acted on several notable acquisition finance deals throughout FY2020/21, despite it being such an unpredictable time. We advised LDC on their investment in independent professional trustee and pensions support services business, Ross Trustees, including on securing bank support from HSBC UK Bank. We supported Metro Bank Plc on several deals to finance the acquisitions of dental practices by Riverdale Bidco Limited. We also assisted long-term client, Kee Safety Group, on securing financing from Lloyds Bank Plc to fund the acquisition of maintenance platforms manufacturer, Flex Decks Inc.

We acted on several notable acquisition finance deals throughout FY2020/21, despite it being such an unpredictable time. We advised LDC on their investment in independent professional trustee and pensions support services business, Ross Trustees, including on securing bank support from HSBC UK Bank. We supported Metro Bank Plc on several deals to finance the acquisitions of dental practices by Riverdale Bidco Limited. We also assisted long-term client, Kee Safety Group, on securing financing from Lloyds Bank Plc to fund the acquisition of maintenance platforms manufacturer, Flex Decks Inc.

Our year in Asset-Based Lending

While FY2020/21 was obviously a challenging year, we were pleased with the level of asset-based lending transactions. We found that, once again, independent providers stole the march on the clearing banks and remained keen to grow their portfolios in the mid-market. They achieved this by providing more imaginative funding and full ABL solutions and showing a greater appetite for servicing less loved sectors. To maximise success, asset-based lenders look hard at the strength of the management teams they back, including their track record in administering ABL facilities. 

FY2020/21 saw us continue our relationship with long-standing client, Leumi ABL. We advised them on numerous ABL facilities, including an invoice discounting, plant and property facility to leading arable farmers, Lincolnshire Field Products Limited. In fact, in FY2020/21 we advised funders on several sizable revolving plant and machinery facilities. 

As well as acting funder side, we had a busy year advising companies on ABL transactions, such as interactive events company, Brick Live International Limited, who received facilities provided by Close Leasing Limited and Davicon who turned to Arbuthnot Latham for their refinance.

2021 started with a bang. We have already advised on several notable transactions including Breal Zeta on ABL facilities to Evtec Automotive to facilitate its purchase of Arlington Automotive from its administrators.

While FY2020/21 was obviously a challenging year, we were pleased with the level of asset-based lending transactions. We found that, once again, independent providers stole the march on the clearing banks and remained keen to grow their portfolios in the mid-market. They achieved this by providing more imaginative funding and full ABL solutions and showing a greater appetite for servicing less loved sectors. To maximise success, asset-based lenders look hard at the strength of the management teams they back, including their track record in administering ABL facilities. 

FY2020/21 saw us continue our relationship with long-standing client, Leumi ABL. We advised them on numerous ABL facilities, including an invoice discounting, plant and property facility to leading arable farmers, Lincolnshire Field Products Limited. In fact, in FY2020/21 we advised funders on several sizable revolving plant and machinery facilities. 

As well as acting funder side, we had a busy year advising companies on ABL transactions, such as interactive events company, Brick Live International Limited, who received facilities provided by Close Leasing Limited and Davicon who turned to Arbuthnot Latham for their refinance.

2021 started with a bang. We have already advised on several notable transactions including Breal Zeta on ABL facilities to Evtec Automotive to facilitate its purchase of Arlington Automotive from its administrators.

Our year in Corporate Banking

Our Corporate banking team were kept busy throughout FY2020/21. We undertook numerous transactions for long-standing client, MEIF Maven Debt Finance, as they provided their clients with the requisite funds to facilitate growth. We also acted for relatively new client, Westbrooke Alternative Asset Management UK Limited, on various financings throughout the year. The COVID-19 pandemic saw us advise on several government-backed lending scheme transactions and rescue financings in various industry sectors.

Our Corporate banking team were kept busy throughout FY2020/21. We undertook numerous transactions for long-standing client, MEIF Maven Debt Finance, as they provided their clients with the requisite funds to facilitate growth. We also acted for relatively new client, Westbrooke Alternative Asset Management UK Limited, on various financings throughout the year. The COVID-19 pandemic saw us advise on several government-backed lending scheme transactions and rescue financings in various industry sectors.

Our year in Real Estate Finance

In FY2020/21 the real estate finance landscape was characterised by waivers and amendments: relaxing covenants and extending repayment terms; some switching to base rate or compounded SONIA ahead of the demise of LIBOR and the provision of additional security by borrowers to bolster loan-to-value covenants. Highlights from our real estate finance teams included: advising a national Plc housebuilder on its credit facilities in excess of £500m, advising a UK clearing bank on its refinancing of £130m credit facilities provided in relation to a property portfolio, and advising Hydrogen Falmouth Limited on a development facility provided by OakNorth Bank.

In FY2020/21 the real estate finance landscape was characterised by waivers and amendments: relaxing covenants and extending repayment terms; some switching to base rate or compounded SONIA ahead of the demise of LIBOR and the provision of additional security by borrowers to bolster loan-to-value covenants. Highlights from our real estate finance teams included: advising a national Plc housebuilder on its credit facilities in excess of £500m, advising a UK clearing bank on its refinancing of £130m credit facilities provided in relation to a property portfolio, and advising Hydrogen Falmouth Limited on a development facility provided by OakNorth Bank.

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