Law firms and banks are taking urgent steps to retrain their senior staff in restructuring as they anticipate a surge in companies seeking emergency funds and debt rearrangements due to the impact of the coronavirus pandemic on corporate cash flow. While the transport, travel, and retail sectors have initially borne the brunt of the crisis, experts predict that this trend will extend to a wider range of industries as lockdown measures and social distancing continue to affect economies worldwide. Global stock markets have suffered their worst week since the 2008 financial crisis, heightening fears that the pandemic could bring about severe damage to the global economy and numerous organizations.

According to an anonymous partner at a major U.S. law firm, the workload related to restructuring deals has been relentless. In order to expedite these deals and address concerns that some parties may have second thoughts, law firms are reallocating personnel from other departments to support their restructuring businesses. Additionally, virtual training sessions are being organized for the entire UK office to meet the increased demand.

A lawyer from a London-based firm, who usually specializes in stock market listings, disclosed that he has been redirected to handle the growing demand for rescue deals. Over the weekend, he and his team worked on a balance sheet fund-raising initiative and received multiple requests for proposals for rescue rights issue transactions.

Numerous companies are on the brink of announcing plans to raise funds to overcome cash shortages. Bankers and lawyers are inundated with calls from organizations seeking guidance during these challenging times. Joel Ferguson, a partner in Allen & Overy’s global restructuring group in London, highlighted that companies already facing difficulties or operating in struggling sectors would be most heavily impacted by the financial distress caused by the coronavirus.

Bankers have also reported being flooded with pitches for rescue deals, while regular fundraising efforts are being expedited to secure capital. Much of the current focus is on finding ways to adapt and optimize existing plans to maximize funding opportunities. An expert in restructuring at an investment bank emphasized that the rapidly changing situation poses a significant challenge, as organizations need to adapt to new developments on a daily or even hourly basis.

The scramble for cash draws parallels to the fallout experienced during the financial crisis, when real estate companies faced difficulties and lawyers had to revise documentation for stock market launches to allow for rights issues. Currently, most firms are primarily focusing on implementing internal cost-cutting measures and accessing credit facilities. However, it is expected that larger distressed, restructuring, and rescue deals will soon be announced.

Useful links:
1. Financial Times: Coronavirus and its impact on businesses
2. Allen & Overy: Insights on restructuring and finance