UK: Finance Monthly - November 2010

Last Updated: 10 December 2010
Article by Jeremy Walsh

Welcome to the monthly finance bulletin from our banking and corporate recovery department. We were delighted to be placed highly in the most recent Chambers and Partners directory, in particular amongst the top tier of law firms advising sponsors on banking transactions. This bulletin provides an overview of some recent market developments and trends in the finance sector. This issue also features a spotlight on readiness for refinancing. Please get in touch if it raises any issues that you would like to discuss. Jeremy Walsh, Head of Banking Department

G20 endorses Basel III and draft legislation expected March 2011

On 12 November 2010, the G20 leaders endorsed the Basel III agreement. On the same day, the European Commission stated its intention to publish the draft legislation applying Basel III, by amendments to the Capital Requirements Directive, in March 2011.

CBI/ACCA survey highlights the range of financing options being utilised by small businesses during the credit crunch

A report jointly published on 29 October 2010 by the Confederation of British Industry and the Association of Chartered Certified Accountants has analysed the various financing options being used by UK small and mediumsized firms ("SME's"). Their findings show that, although bank overdrafts are still the most common form of funding for SME's, there is general concern in the market about the availability of bank facilities which is making many SME's resort to alternative sources of funding. These alternative sources include extending credit from suppliers, late payment and borrowing from owners, directors, families and friends.

The report concludes that, despite apparent scepticism as to the availability of credit in financial markets, bank overdrafts are still the most popular form of finance. However, financial staff and advisers need to be better-placed to offer advice to SME's advice as to the implications of offering or accepting trade credit arrangements, and more needs to be done to educate SME's as to the benefits of effective credit risk profiling.

FMLC and CLLS respond to the consultation on the implementation of EU Directive 2009/44/EC on settlement finality and financial collateral arrangements (the "Directive")

The Financial Markets Law Committee and the City of London Law Society have now responded to a consultation on the Directive, which is likely to result in the amendment of the Financial Collateral Arrangements (No.2) Regulations 2003 (the "FCAR") and the Financial Markets and Insolvency (Settlement Finality) Regulations 1999.

One of the key issues raised in both responses is the difficulty in assessing whether the FCAR apply to floating charges, particularly over intangible securities. Amongst other things, this is important because the FCAR disapply the requirement to register floating charges under the Companies Act 2006.

Both responses propose the resolution of ambiguities in the legislation, suggesting the introduction of a wide definition of "possession" and/or revised interpretation of "control", at least one of which is required on the part of a chargee over the charged assets in order for the FCARs to apply.

Insolvencies in the third quarter 2010

The Insolvency Service recently published statistics showing insolvencies in England and Wales in the third quarter of 2010. There were 3,974 company liquidations, a decrease of 13.9% on the same period a year ago. Other corporate insolvencies showed a decrease of 27.7% on the same period a year ago.

In the courts

Leyland Printing Company Limited (in administration) v Leyprint Limited (in administration)

[2010] EWHC 2105 (Ch)

The administrator of the Applicants applied for directions as to the proper treatment of creditors' claims that had become statute-barred (due to previous administrators' delay) under the Limitation Act 1980. No objections had been received from creditors, and a director of the parent company of the Applicants expressly stated they had no objection to the application.

The judge confirmed that (unlike liquidation) the making of an administration order under the regime prior to the Enterprise Act 2002 did not cause time to stop running for the purposes of the Limitation Act 1980, because it conferred no power on the administrator to distribute the company's assets. He also confirmed that a creditor whose claim is statute-barred can only prove in a liquidation or administration with the consent of the creditors and members whose position would be adversely affected. In this case, the creditors' failure to object did not amount to agreement to the admission of statute-barred claims.

BNY Corporate Trustee Services Limited v Eurosail-UK 2007-3BL PLC and others

[2010] EWHC 2005 (Ch)

The court considered whether Eurosail- UK 2007-3BL PLC, the issuer of notes in the context of a mortgage securitisation (the "Issuer"), was unable to pay its debts within the meaning of section 123(2) of the Insolvency Act 1986, triggering an event of default and, potentially, enforcement of the notes and the switching of priority in respect of the proceeds of the underlying mortgages.

The judge found that the Issuer was not unable to pay its debts under section 123(2). For the purposes of the "balance sheet insolvency test", assets should be valued at their present value and should not include contingent or prospective assets. The test should take account of contingent and prospective liabilities, in the context of the relevant facts, but they should not necessarily be valued as if due immediately. As a result, an apparent deficit on a balance sheet would not always indicate balance sheet insolvency.

This conclusion was reached regardless of the existence of a special call option in respect of the notes granted to the Issuer's associate company entered into to ensure "insolvency-remoteness".

Recent transactions

We have advised on a number of recent transactions, including:

Acquisition of Lumison

We recently advised Bridgepoint Development Capital on the financing for its acquisition of IT services company Lumison.

Meyer Bergman

Instructed by Meyer Bergman, we advised the joint venture vehicle in connection with the financing and acquisition of The Burlington Arcade, Piccadilly.

Metric Property Investments plc

We advised Metric Property Investments plc on a £50m revolving acquisitions facility arranged by The Royal Bank of Scotland plc.

Department news

Chambers and Partners directory

We were very pleased to receive high rankings in a number of sectors in the most recent Chambers and Partners directory. In particular, we were delighted to be placed in the top tier of law firms advising sponsors on banking transactions.

Spotlight on... readiness for refinancing

In our October monthly finance bulletin we discussed the incoming "refinancing wall". This month we consider practical and strategic steps that a company can consider taking to maximise its prospects of securing a successful refinancing in the current market.

Refinancing with incumbent lender(s):

  • Consider when the dialogue should be started. Too late and you could run out of time; too early and the lenders may not engage properly. Whenever you meet, have all relevant information to hand or accessible.
  • In addition to information required to be provided under your facilities documents, consider any additional information about your business, recent trading and prospects that will assist in presenting the case for a refinancing, and how it should be presented.
  • Does your business have any "loose ends" to sort out before the refinancing discussions start? Examples of issues to consider are changes in key management positions, underperforming contracts, property liabilities or business units and litigation.
  • Can a refinancing be avoided (e.g. by agreeing to extend maturities of existing loans)?

Discussions with your investors:

  • Your investors may have a significant role to play in getting the refinancing away. What are their views as to how you should approach the refinancing discussions? Would they provide any further funding as part of the refinancing package, if necessary?

Planning in the alternative:

  • What are your fall-back position(s) if your incumbent lenders are unwilling to refinance? Consider potential alternative providers, both debt and equity. How much time and what information would they need? An asset-based lender, for example, will require detailed asset valuation figures.

Be proactive:

  • Given the limited liquidity in the market, it is important for borrowers to approach their lenders with sensible proposals that are substantiated by credible information.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions