Coronavirus Impact on Lenders and Borrowers: Client Alert Digest

The novel coronavirus (COVID-19) has battered global markets as many industries grapple with weaker demand and an uncertain outlook. In turn, borrowers and lenders may find themselves navigating credit documentation that did not anticipate such a drastic downturn, leaving forecasted cash flow (which lenders counted on for repayment) lower than the reality. While credit documentation may not specifically address a global outbreak, it will put pressure on certain provisions of a credit agreement. For example, a borrower with lower EBITDA may have unexpected difficulty paying back its loan or complying with financial covenants, which in turn will have borrowers and lenders poring over the events of default (and whether “force majeure” is applicable) and amendments, waivers, and consents sections of their agreements. Those borrowers with revolving facilities may also question whether they can bring down their “material adverse change” representation and warranty. Banks themselves must address these issues not only as lenders but as employers and regulated industries, which carry additional challenges (such as compliance with or changes to risk management policies and reporting obligations to regulators). The client alerts and related content below discuss these issues in detail.

• Coronavirus Implications in Loan Documents (Shearman & Sterling, March 11, 2020)
• COVID-19: Debt Buyback Considerations (Paul Weiss, March 13, 2020)
• COVID-19: Compliance and Operational Risks for Financial Institutions: EU Financial Authorities Provide Initial Guidance (Mayer Brown, March 13, 2020)
• Legal Alert: New York Department of Financial Services issues guidance and request for preparedness plans related to COVID-19 due by April 9, 2020 (Eversheds Sutherland, March 13, 2020)
• Financial Regulators Require Pandemic Policies in Response to COVID-19 Threats (Duane Morris, March 13, 2020)
• Coronavirus: Checklist for financial services firms (Clifford Chance, March 12, 2020)
• Coronavirus (COVID-19) Issues Related to Loan Financings (Clifford Chance, March 2020)
• Coronavirus: Five steps to building a financial institution's resilience (Clifford Chance, March 11, 2020)
• Novel coronavirus – Key considerations for financial institutions: business continuity and regulatory compliance (Reed Smith, February 5, 2020)
• Cancellations, Quarantines and Closings - Coronavirus Considerations for Hospitality Lenders (King & Spalding, March 10, 2020)

• Feds Offer COVID-19 Small Biz Disaster Assistance Loans (Law360, March 12, 2020
• Growth Slows In Global Services Trade As Virus Takes Hold (Law360, March 12, 2020)
• Senate Dems Press CFPB Head On Coronavirus Response (Law360, March 10, 2020)

For more information or to download the complete Coronavirus Resource Kit, click here.