Stephen Prendiville, Head of Sustainability at EY comments “Lenders and their credit committees are increasingly expected to include graduating sustainability covenants and climate risk assessments when considering applications for finance. This will apply to long terms and short-term lending alike. Borrowers that engage meaningfully and embed sustainability in their application and associated analysis, can expect more positive attention.”
Debt solutions available
When negotiating with your lenders from overseas there is a range of options which may be helpful. Despite the previously outlined headwinds, there are numerous international lenders who see Ireland as an attractive destination for debt transactions.
Previously many companies saw their debt solution as a “banks vs alternative lender” solution; however, we are working with a number of companies where banks are working alongside alternative lenders, working capital specialists, private placement and bond issuers thereby demonstrating that different debt solutions can co-exist for companies. This growing pool of lenders results in a more competitive landscape and choice for the borrower, thereby increasing their debt options. Having a mix of lenders attracts different terms and conditions for different funding needs but can also result in diversification of your refinance risk which is an important criterion in your debt negotiation.
Some of the types of debt companies should consider:
- Growth finance – Expansion?
- Acquisition finance – Buying another business?
- Real estate specialist lenders - Development/acquisition?
- Refinance – Existing debt / amend & extend?
- Recapitalisation – Capital structure optimisation?
- Special Situation – Liquidity funding?
- Private Placement – Long-term debt?
There are numerous solutions in the marketplace to the type of debt required but as a summary here are some of the types, terms, and maturity timelines.
Senior Debt |
Mezzanine |
Unitranche |
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Type of Funding |
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Funding Terms |
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Maturity |
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Conclusion
Economic headwinds are likely to continue into 2023, with the lack of certainty due to inflation and geo-political events. Likewise, most commentators are expecting interest rate rises in the EUROZONE to continue into 2023.
Summary
Whether your company is considered over leveraged or not, a well thought out debt plan will allow companies to access the numerous appropriate debt structures and lending options available to Irish companies in the market.