The Government and Bank of England have announced a number of schemes and measures to support business during the “Covid-19 shock”. The details are being developed but what is known so far is summarised below.
For the large business scheme – the CCFF – further details were provided in a Market Notice in the afternoon of 18 March 2020 that can be accessed at the link at the bottom of this email. For the smaller business loan guarantee scheme provided by the British Business Bank details can also be found through the link below: this scheme should be accessed through the partner banks; corporates may find it easiest to approach their current bank in the first instance to simplify on-boarding.
The intention is that businesses which were viable prior to the “Covid-19 shock” can access rescue funding. Where businesses were already struggling it may be that accessing funding is more difficult, if they are not able to demonstrate they were previously sound, either through bank lending processes or through a good credit rating.
If you have any questions, please do get in touch with your usual CMS contact. We have extensive experience of advising clients on existing Bank of England liquidity schemes.
The Covid Corporate Financing Facility (CCFF): for large businesses
Full details of the scheme including how to apply, a user guide and pricing will be available on Monday 23 March.
Companies planning to access the scheme can prepare by ensuring key information, including key financial information, is available.
- The CCFF will be provided by the Bank of England for at least 12 months and BOE will give at least six months’ notice of any planned withdrawal.
- Aimed at businesses that usually access funding through money markets.
- It will take the form of commercial paper (debt securities with a maturity of up to one year and no or limited events of default) (CP) which will be acquired by the Bank of England.
- It is not necessary that the issuer has previously issued CP.
- The business must make a material contribution to the UK economy.Having significant numbers of UK employees or UK headquarters will usually be regarded as meeting the requirement. UK revenues, customers and operating sites will also be relevant. Having a foreign-incorporated parent will not exclude you from the CCFF provided the UK incorporated entity has a “genuine UK business”.
- The business can be a non-financial company or a non-bank financial company (note that the inclusion of non-bank financial companies is a development from the original announcement) if they materially contribute to corporate financing in the UK.
- The business must have been in sound financial health prior to the Covid-19 shock.
- Eligibility will be based on pre-Covid-19 shock credit rating. Where available this means a short term credit rating on 1 March 2020 of a minimum of A-3/P-3/F-3 from a least one of S&P, Moody’s and Fitch. It may be possible to use long-term ratings where a short term rating is not available or, if no rating is available, the Bank of England may consider assessing whether the business is of equivalent financial strength.
- Where an SPV finance issuer is used, a parent guarantee will be required.
The Coronavirus Business Interruption Loan Scheme: for companies with a turnover of up to £41m
Full details of the scheme will be available on Monday 23 March. However, as this is a lender guarantee scheme, corporates should be taking action now to contact their existing bank if funding will be required. It is not necessary to use your existing bank but the AML/KYC requirements will be easier and quicker to satisfy if you do.
- This is provided by the British Business Bank and is to provide a lender to a business with an 80 per cent. guarantee of the facility balance. The list of partner institutions can be found at the link below.
- The nature of the facilities available would depend on the lender participating. Finance terms will be 3 months – 10 years for term loans and asset finance, and up to 3 years for RCFs and invoice finance.
- The scheme is for loans of up to £5m.
- The Government will pay the interest payments for the first six months to assist with cashflow.
- The announced eligibility criteria are that the business:
- has a turnover of less than £41m;
- is in an eligible sector (almost all non-financial sectors other than certain industrial sectors);
- sound borrowing proposal but insufficient security;
- no state aid above EUR 200,000 in prior two years; and
- it is stated that further eligibility criteria will be announced from next week. It is unknown whether these will mirror the larger corporate proposal and include requirements around UK based business, employees and revenues.