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UK
Deal Maker of the Year Awards 2013
WINNER - DAVID MORTON DEAL: The Malcolm Group £50m refinancing
NAME: David Morton COMPANY: DLA Piper
EMAIL: david.morton@dlapiper,com WEBSITE: www.dlapiper.com
BIO
David heads up the DLA Piper Finance Team in Scotland and has been with the firm for three years.
He deals with all aspects of corporate
lending: acquisition finance, real estate finance, ABL and receivables financing, refinancing, restructuring and general corporate lending, usually acting for lenders, but also as in this case acting for borrowers.
W.H. Malcolm is a thriving logistics and construction group whose main banking facilities were due to be renewed. A desire to increase the extent of their facilities to support future growth together with a wish to diversify their banking relationships led to our being instructed to act on behalf of the Company in relation to three separate bilateral banking arrangements with Barclays, HSBC and Santander with each lender focused on different asset classes of the Group and with total facilities in excess of £50m. We were closely involved with the Company from the outset, providing advice on the terms proposed by the various banks and the resulting relationships between the banks and the Company.
Bank of Scotland, an incumbent Bank was exiting the relationship and accordingly negotiations had to be effected in parallel with four banks, in order to effect the refinancing, all with differing interests and requirements.
That we were able to effect completion of the refinancing in one day in an orderly fashion and on the correct side of midnight speaks volumes for the quality of the DLA Piper team
co ordinating matters and the commercial and pragmatic approach adopted by the Banks and their advisers.
There has been little transactional activity in the Scottish banking market in recent years so it is encouraging to see three banks with a desire to support a successful and growing business like W.H. Malcolm.
Since the financial crisis occurred in 2008 we have seen an upturn in facilities incorporating at least an element of asset based lending, although the increase in this form of lending has not been as dramatic as might have been anticipated, given that it represents an effective use of capital for banks. Possible explanations are that it is not suitable for all businesses, as it clearly requires that the borrower has a substantial asset base; there is an inherent reluctance from less sophisticated borrowers (and perhaps on the part of the banks as well as borrowers) to deviate from the traditional funding arrangements of term loan and working capital facilities; and banks generally not “gearing up” this aspect of their business and perhaps providing the necessary education to potential customers.
Looking forward, it appears that the banks generally have now weathered the storm of the financial crisis and having finally put their houses in order are in a position to return to the market and resume the business of lending to corporate customers albeit in a significantly different manner from the heady days of 2007.
The problem now facing the banks is the dearth of corporate customers that the banks would like to lend to, who are prepared to borrow. Companies who have weathered the recession and emerged strongly have been paying down debt and lack the confidence in the current fragile environment to commit to any “game changing” transactions and incur increased borrowings.
There does appear to be evidence of a growing confidence in the corporate business community that the worst is over.
However, increased
corporate activity does not necessarily signify increased bank borrowing among corporates as transactions are funded from own resource or equity or capital market funding. There has not been a widespread return to the leveraged finance arena, at least in Scotland.
However, being cautiously optimistic looking forward, the planets are beginning to come into alignment - banks are ready, willing and able to lend money, sensibly and for the right transaction; corporate confidence is returning as the economy moves out of recession; interest rate conditions remain benign. What we need is a trigger, an event which will give rise to a “feel good” factor and encourage companies to have the courage and confidence to embark on those game changing transactions, necessitating increased bank borrowing.
Maybe, just maybe, more deals like the W.H. Malcolm refinance can serve as a beacon to help light the way!