Without question, COVID-19 poses unprecedented global public health as well as humanitarian challenges.  From an economic perspective, it marks the end of a growth-fueled credit cycle.  It has been replaced by volatility, uncertainty and disruption.  Capital markets, commerce and consumers all face strong headwinds. The rapid outbreak of the coronavirus presents an alarming health crisis that the world continues to struggle with, and there is a no less significant economic impact (in addition to the human one).  If there is a lesson to be learned, it is that the next devastating, yet unnamed outbreak is not so much a matter of “if”, but “when”.

Barson Advisory is helping a number of corporate clients assess and understand the ramifications of COVID-19 and navigate its potential effects, including a wave of restructuring activities and increased litigation related to corporate debt, contract defaults and bankruptcies.  An impact on customer behavior is only a part of what businesses are experiencing as a result of the economic shock from this global health crisis.  They can also expect their current business and operating models to be questioned in the face of the “new normal” in the post-COVID environment.  Our advisory practice places a substantial emphasis on aligning challenging financial ambitions with the core elements of a sustainable business model.  While we don’t yet know the full extent to which the pandemic will impact us on a variety of levels, we offer the following considerations for those navigating coronavirus-related business challenges.

Food For Thought:

  • Do we need to engage in emergency liquidity measures?

  • Are our company’s financial goals still realistic in the mid-term?

  • What options do we have to strengthen our ability to withstand an impact on liquidity, income and assets in a crisis situation?

  • Does this crisis change our strategic goals?

How to Prevail:

  • Which of my core business processes need to be modified to increase resilience?

  • How has our technological infrastructure fared during this crisis?

  • Have our people been able to thrive during this crisis?  What needs to be changed to enable them to be equally or more productive?

  • Has our organization and governance proved nimble and effective during the crisis?

Developing an out-of-court restructuring path requires timely planning well in advance of exhausting liquidity. Companies should therefore use the time available to them wisely and not just wait for potential bail-outs, market improvements or other future developments that may stave off a liquidity crisis.  In some cases, new sources of liquidity such as equity raises and junior debt may require companies to obtain waivers or consents in order to proceed.  Businesses will face their own unique challenges as they focus on both the safety of their employees and the continuity of their operations.  It is therefore critical that they are proactive in assessing their various risks and vulnerabilities from both an operational and a financial standpoint, and that they act decisively to mitigate such issues.

Our firm is fully engaged with its clients to help navigate this disruption and assess its impact on their key stakeholders.  Reach out to Barson Advisory to review or continue this important discussion.