Three Key Takeaways From Our Restructuring Strategies in Light of COVID-19 Webinar
1. Revisit your credit agreement to refresh your understanding of financial covenant requirements that may be at issue or subject to potential default in light of resulting business interruption and challenges. If there are any that present a concern, be prepared to discuss them with your lender in an effort to reach an understanding as to a waiver of the covenant requirement, a modification of the covenant benchmark, or a forbearance agreement to clarify that an exercise of remedies will not be pursued. It is important to be proactive and candid with your lender.
2. Consider the implications of customer financial challenges and the possibility of delayed or reduced invoice payments or no payments for an extended period of time. Explore potential rights under customer agreements and/or the Uniform Commercial Code (UCC) to alter current payment terms and, possibly, seek adequate assurance of future performance in accordance with the UCC. In addition, be aware of financial challenges that your vendors or suppliers may be experiencing and be on the lookout for fraud and any possible bankruptcy filings.
3. Revisit cash flow projections and business plans regularly, even as frequently as every few weeks, to determine the potential need to modify current spending plans. Update cash flow projections in "real time." Be honest and realistic about revenue projections. Most importantly, communicate any such issues with your lender, as appropriate, and keep a clear line of communication open going forward. Show your lender a straightforward plan on how your company plans to address cash flow challenges.