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Liquidity & Business Review
When a borrower has breached or is expecting to breach its banking covenants or has a looming liquidity issue, an Independent Business Review (IBR) is often requested by lenders in order to establish a sound basis on which to negotiate and move forward.
Where ongoing liquidity is a concern or there is a request for new money to be provided we undertake a review of the borrower’s short term liquidity forecast (typically a period of 13 weeks) in order to:
- understand the robustness of cash management & reporting systems;
- analyse the key drivers of cash flow; and
- assess what, if any, mitigating actions are available to mitigate any cash need.
Independent Business Review
We can help lenders take a view as to whether the borrower’s business plan provides a reasonable basis to determine the debt capacity and to make future lending decisions by taking the following steps:
- Carrying out a review of track record plus normalising one –off exceptions, in order to provide a basis to test and challenge management’s business plan
- Assessing revenue, costs and cash conversion assumptions included in the plan, and commenting on their reasonableness
- Identifying sensitivities and vulnerabilities where appropriate on which to anchor a ‘banking case’
- Reviewing the adequacy of the existing covenants, highlighting headroom/potential breaches
IBRs are not just ‘about the numbers’ but also about the operations of businesses and the markets in which they operate. Hence we regularly work with sector experts from our Strategy, Commercial and Operational teams. If required, we also have access to specialist input from our Tax, Real Estate and Pensions teams.
In addition to our work in the UK, we have extensive experience in undertaking Liquidity Reviews and IBRs of borrowers with cross-border, multi-jurisdictional solutions in conjunction with colleagues in Deloitte member firms worldwide.