Debt management as strategic lever to support recovery

With the end of the longest “lock-down” phase in the last 70 years, the majority of Italian companies had the chance to begin working again, at least partially.

During the emergency period, most of the efforts made by the institutions obviously concerned public health and safety, "sacrificing", in part, public and private economic and financial interests.

The Liquidity and Relaunch Decrees started to band-aid a series of critical issues thanks, above all, to the establishment of various types of moratoriums such as, firstly, fiscal and banking postponements.

However, the technical timing of enforcement of some measures has proved to be longer than expected and, in some cases, not consistent with the timing needed to face the crisis.

What will happen now?

It is a widespread opinion, even among the highest international levels, that the real test-bed for companies will be in the second half of 2020, in the so-called "post-Covid" period, i.e. with the restarting of operating activities and, above all, with the end of the moratoriums that will inevitably worsen companies’ unbalanced cash flows and consequently weaken assets.

As usual, the time factor is a key element for implementing adequate financial policies. The ability to timely interact with banking and financial partners is fundamental for companies that want to overcome this period, anticipating the economic dynamics to be faced in markets that, since the crisis, have extremely changed.

Consequently, companies will need to show banks and shareholders how they will face these dynamics, even using diverse financial instruments. Banks, if properly informed, could not avoid accompanying companies in this new challenge, aware that, after this moment, enormous opportunities will open up to the readies, soundest and most innovative players.

Here is when the debt advisor comes in. The debt advisor is the one who reconciles the needs of banking institutions with the new value propositions companies elaborate, justifying their requirements and demonstrating their validity.

Indeed, through the financing memorandum, the debt advisor concentrates contingency plan and business plan in one unique document, duly “translated” in a language that financial backers immediately understand, clearly illustrating how the cash flows the company will generate in the coming years of activity will remunerate debt and venture capital.

From tomorrow onwards, the far-sightedness of many companies shall be measured considering the time needed to implement those strategies compared to the time needed to issue a new Decree!