News - 02/12/2020

Asset Based Lending News Dec 2020

Our market is busy and we see a continual stream of new opportunities.

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Over the last 4 months since our last Newsletter we have continued to be very busy.

We returned to site visits quickly after lockdown eased and so in that regard it was business as usual. As we speak Lockdown 2.0 has just ended and we have moved into an updated tiering structure. Our initial assessment is that the lockdown and tiering should have very limited impact on the work we are doing. Our market is busy and we see a continual stream of new opportunities.

We remain happy to give initial assessments, which can help structure deals in early stages and it is great to then see these deals progress into actual valuations and importantly completed deals for our Clients, whether they be advisers or the lenders themselves.

Crown Preference was re-introduced on 1st December which will affect all Floating Charge assets, predominantly inventory but some plant and machinery lends will be impacted, particularly where the assets are moving around and cannot be plated. It is also worth noting this impacts all P&M security in Scotland where it is only possible to get a Floating Charge on this asset class.

At the moment we have seen limited impact from this on the number of valuations we have been asked to undertake, but unfortunately for businesses and lenders alike there will be an impact on the ultimate availability from such facilities. In some cases this is coming at an unwelcome time when those businesses have already been impacted by Covid-19 and are in need of additional cashflow, not less.

I mentioned in my last update an expectation that at some point we would see valuations impacted by Covid-19 affects to demand and supply of assets, which would normally result in a softening of asset values. Since the first lockdown eased our Insolvency colleagues have undertaken a number of auctions and to date, in general, the results have been very good, in many cases ahead of expectations. That said we have begun to see certain sectors impacted, such as the travel and leisure industries, thankfully for our ABL clients, however, not a key area of focus. As I said in the Summer the expectation was that values would begin to be impacted as Govt. support packages unwound, which would in turn result in an increased number of business failures and assets coming to market. Unprecedented levels of Govt. support, however, have continued, whether that be through Furlough (now continuing until the end of March 2021), rent and HMRC deferrals and CBILS/CLBILS loans. This is delaying the true impact on business, to the extent that insolvency levels are below what they were in 2019. In turn we are yet to see the true impact on asset values with sale values in our experience holding up well. We will continue to track all asset sales across the UK and reflect any value changes in our valuations. Time will tell the true impact and whether the surprising robustness of the market continues into 2021.

As a reminder we continue to look at all asset types and recent new work has included all assets classes (P&M, Inventory, Real Estate and Receivables). Sectors we have been involved in include – Retail, Plant Hire, Manufacturing, Packaging, Rail Hire, Materials Handling, Mechanical and Electrical Engineering, Civil Engineering, Electrical Components, Printing, CNC Machinery, Sign Manufacture, Construction and Engineering, to name a few.

CNC Machinery

CNC Machinery

Cutting table used in signage sector

Cutting table

Fleet of material handling equipment

Material Handling Equipment

Vertical borer/ turning centre

Vertical Borer

Examples of retail and inventory work

Retail

2020 has been an incredibly strong year for our ABL services, in what has been a very turbulent period. These are conditions in which ABL thrives so our forecast is that 2021 could be even better and we look forward to working with you and seeing your businesses and the industry grow further.

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