p17 pink jan9 7/1/09 16:39 Page 17
ttglive.com
city & finance news
Comment
How to secure better credit terms
Refinancing is becoming harder but there are ways to optimise success, says Nigel Birkett
T
he decline in credit and deteriorating restructure their bank facilities. ■ Security: If a business is asset-rich, whether
economic climate are beginning to Restructuring or refinancing can be a massive in terms of a core level of stock and debtors, or
feed through to the travel sector. And challenge. However, by preparing and thinking in terms of unencumbered property, this will
travel firms are facing the additional about it from the bank’s perspective, businesses assist with the banks’ credit process. It means
challenges of reduced consumer spending and can improve their chances of success. they can point to tangible assets to minimise
fuel prices that have been hedged too high. These processes are expensive, but they give exposure in the event of the business failing.
The recent refinancing of Holidaybreak is a directors the chance to secure valuable liquidity. ■Protection: Banks are more focused on under-
good example of the challenges faced by travel So what makes a company a strong candidate standing how their exposure to the business
businesses. for refinancing or restructuring? will be protected and, ultimately, repaid.
Despite refinancing its existing facilities in ■Strong management: In a tough environment, While not all travel businesses are ideal
May 2008, a recent downturn in trading in its banks look for an experienced team with a candidates for refinancing, there are things
Hotel Breaks Division and heightened uncertainty track record of managing a business through that all directors can do to ensure more
of trading in a recession led to the company recession. constructive discussions with their lenders
seeking an amendment to its facilities. ■ Market position: Directors must demonstrate and it is important to build strong relationships
In return for securing additional headroom how the company can defend its market with banking partners.
on its covenants, there was an amendment fee position and margins through a downturn.
of £2.7 million and an increase in interest margin ■ Cash generation: While profit was important Nigel Birkett is head of the North West Debt
from 1.3% over Libor to 3.25% over Libor. 18 months ago, the key aim in the current climate Advisory team at Deloitte
With panic setting in in the banking sector, is to generate cash and minimise leakage
more companies are being forced to renew or from working capital and capital expenditure. ■ ‘Be trustworthy’: Comment, p18
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09.01.2009 17
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