Creative solutions to assist borrowers

Some thoughts on the current landscape for banks funding commercial and residential investment property.

As we move through the economic cycle and the significantly increased market volatility that has led to increasing interest rates, we are all seeing an adverse impact on Bank’s stress test assumptions and covenant testing. We know that this leads to reduced credit quality, increasing Risk-Weighted Assets and reduced Returns on Equity (in many ways a perfect negative storm).

Market volatility is already evident in a negative impact on some valuations as yields increase and with an increasing number of near-term maturing loans and expiring fixed rates, we are seeing lenders with unwanted increased credit risk on their books, with lower Loans to Value and less repayment capacity.

Coupled with changes in lender’s appetites around certain sectors and broader policy amendments for both owner-occupied and investment property, this is a time when borrowers need both strategic and practical help.

There are still a wide range of lenders out there and many alternative lenders are working on creative solutions to assist borrowers. One size certainly does not fit all.

As experienced lenders ourselves, we at Otium Partners are used to working with banks and other lenders to refinance existing loans and work in a strategic way with borrowers as they seek to manage their assets through turbulent times.  

We are confident that we can find a new lender in most scenarios, even if this is a shorter-term fix to enable a strategic move to take place, eg effect a sale, change of planning use, restructure of debt, enhancement of tenancies or even just waiting for market interest rates to improve.

Quite often, the ability to just “buy some time” is invaluable for a borrower whilst potentially benefitting the lender in managing their credit risk profile.

The triggers are typically facility term or fixed rates expiring where a borrower may struggle to meet covenants and policy or maintain serviceability. In these cases, we would be delighted to be introduced.

So, whether you’re a lender of borrower, please do feel free to contact me for a no-obligation discussion in the first instance about any scenario you may have. We work collaboratively with all parties and are confident in our ability to find solutions.

Jeff Durant
Otium Partners Ltd

T: 07872 601662

E: jeff.durant@otiumpartners.com