Commercial Loan Modification Opportunity & Other Capital Market Updates

Thoughtware Alert Mar 26, 2020
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Bank regulators recently issued an interagency statement addressing loan modifications in light of the COVID-19 outbreak, but borrowers must contact lenders quickly, while their accounts are in good standing; in general, this is when contractual payments are less than 30 days past due as of the time a modification is applied. The agencies called on banks to work with their customers to provide relief that may involve debt modifications or concessions, noting that examiners will not criticize prudent efforts to modify existing loan terms to affected customers. This BKD Thoughtwarearticle details guidance in regard to debt markets.

BKD Capital Advisors (BKDCA) is actively tracking the capital markets as health and economic events unfold. Recognizing that we are early in this crisis, there is little doubt the capital markets landscape will be under extreme pressure for the foreseeable future.

  • The Federal Reserve has taken unprecedented steps to maintain liquidity in the financial markets. The underlying mechanics of the U.S. Department of the Treasury, asset-backed security and corporate bond markets appear to have steadied. The upcoming $2 trillion fiscal stimulus package has been well received by the equity and debt markets.
  • A Small Business Investor Alliance survey published on March 21 suggests 80 percent of small businesses have cash flow concerns and 40 percent do not have sufficient cash reserves or access to capital to operate for the next 60 days.  
  • Banks carry more capital compared to 2008, which will help absorb potential credit losses resulting from the COVID-19 crisis.
  • Banks and other sources of capital are being more selective/cautious in providing credit to new customers.    
  • Overall credit spreads have widened, reflecting increased market uncertainty.
  • Anecdotally, credit funds that leveraged commercial bank financing may be experiencing funding issues. 
  • We expect a dramatic slowdown in deal activity in the short term as investors manage existing portfolio investments and seek more clarity on the direction of the economy.

BKDCA expects it will be weeks or months before consistent equilibrium returns to the capital markets. In the meantime, BKDCA has the experience, resources and capabilities to assist clients in navigating through this market.  

  • Our professionals have executed in excess of $5 billion of private capital.
  • With experience in raising capital in all layers of the balance sheet, BKDCA can provide a full suite of solutions to our clients. 
  • Through our experience and as a source of deal flow, we have access to a broad range of leading capital providers.

We welcome the opportunity to assist you or your clients with any questions they may have regarding their financing options. For more information, reach out to your BKD Trusted Advisor or use the Contact Us form below.
 

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