Connect with us
Finance Digest is a leading online platform for finance and business news, providing insights on banking, finance, technology, investing,trading, insurance, fintech, and more. The platform covers a diverse range of topics, including banking, insurance, investment, wealth management, fintech, and regulatory issues. The website publishes news, press releases, opinion and advertorials on various financial organizations, products and services which are commissioned from various Companies, Organizations, PR agencies, Bloggers etc. These commissioned articles are commercial in nature. This is not to be considered as financial advice and should be considered only for information purposes. It does not reflect the views or opinion of our website and is not to be considered an endorsement or a recommendation. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third-party websites, affiliate sales networks, and to our advertising partners websites. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish advertised or sponsored articles or links, you may consider all articles or links hosted on our site as a commercial article placement. We will not be responsible for any loss you may suffer as a result of any omission or inaccuracy on the website.


The UK’s vote to leave the EU rocked the world’s financial system: stock markets plummeted, currencies tumbled and business confidence suffered a huge shock. Just over four months on, the dust is beginning to settle and the business world appears to have reconciled itself with the fact that life must go on, and while uncertainty is inevitable, it presents opportunities as well as risks.

Here, we give our view on what the referendum result means for the UK’s debt markets and why it’s not all doom and gloom when it comes to corporate funding.

Lessons from recent history

First we must look back to 2007/2008. The financial crisis and the resulting regulatory reforms that followed have left a well-capitalised domestic banking sector with an extremely diverse group of “alternative” non-bank lenders to sit alongside it. It is true that the coming months and years will present challenges for the UK economy but unlike the financial crisis, the lenders may well be part of the solution rather than the problem and our experience advising corporates with their banking arrangements in the immediate aftermath of the referendum shows there is no shortage of liquidity in the market.

The issue for lenders looking to deploy capital is not one of supply but one of demand. Given the scale of the Brexit shock, a number of organisations have quite understandably postponed large investment decisions, which might otherwise be funded (in part) through borrowings. With a diminishing demand, for well-advised borrowers that can be decisive around their capital needs, understand their debt capacity and can present their business plan positively, now may be a good time to approach the market.

The question is: what does the debt market offer and what are the strengths and weaknesses of its participants?

Alternative lending 

The 2007/2008 financial crisis saw huge growth for non-bank lenders, which emerged in the UK partly in response to systemic under-supply of credit as mainstream banks were forced to retrench. While “alternative” in 2007/2008, non-bank lenders are by no means alternative anymore, and they are now a core part of the UK’s funding landscape.

Eight years on and in an environment of relative ‘over’ rather than under-supply of credit, the debt landscape is very different. Non-bank lenders have consolidated their position in the market on the strength of what they can offer rather than the absence of alternatives. They have shown themselves willing to be flexible on structures, deal sizes and terms and are often able to provide interest only credit with bullet repayments and high-yield bond style covenants.

Often driven by increasing investor returns, debt funds have provided facilities to entities that are either distressed or who have traditionally found it difficult to access the banking market. Speed of execution has also been an attractive feature for borrowers with non-bank lenders typically being able to move more quickly from mandate to financial close. It is unlikely that these advantages will be lost as a result of Brexit.

Careful choices 

While there are clearly some important advantages with non-bank lenders, they will not suit all types of borrowers. If a company’s business model does not fit with a fund’s current investment strategy, the ability to raise finance with that fund may be more limited than a traditional bank. This problem will be compounded when it comes to refinancing if the debt fund’s mandate has changed during the life of the facility. Perhaps most crucially, if a business has ancillary banking requirements that cannot be provided by a debt fund (e.g. bills of exchange, clearing or RCFs) that business is still going to have to turn to a bank for at least some of its banking requirements.

The referendum result has generated a significant level of uncertainty for the UK economy but in terms of the debt markets the prevailing view is that it is business as usual. With subdued demand, interest rates at record lows and high levels of liquidity, now may be a good time for borrowers to approach the funding market. While Brexit uncertainty might have an impact on a borrower’s decision to borrow, it is unlikely to have a material impact on a borrower’s decision to mandate a bank or a non-bank lender, but it remains critical to understand the strengths and weaknesses of both to ensure that the right type of lender is used.

David Varnham is a banking lawyer and leads the international finance group at national law firm Mills & Reeve. Rory Milligan is a Senior Associate in the banking team at Mills & Reeve.

Continue Reading

Why pay for news and opinions when you can get them for free?

       Subscribe for free now!

By submitting this form, you are consenting to receive marketing emails from: . You can revoke your consent to receive emails at any time by using the SafeUnsubscribe® link, found at the bottom of every email. Emails are serviced by Constant Contact

Recent Posts