
Dementia currently affects 1 in 14 people in the UK. Many people will either know someone with dementia, have had to support and care for someone with dementia or have been diagnosed themselves.
Things are moving very quickly, and it is difficult to predict what will happen, but we would advise you to consider the following potential issues sooner rather than later.
Financial covenants: if there either has been or could be a drop in income, then this could affect any interest cover covenant in your loan agreements. This is often reported quarterly and so may not be reported until the next quarter-end of 30 June. However, please see below the ‘No Default’ representation. Knowing that you are very likely to breach a financial covenant could be a Potential Event of Default.
Events of Default: the following events may be triggered over the next three months:
Representations: when you are requesting a loan or at the time of making any loan, on the first day of each interest period, and on each day a finance document is entered into, the borrower has to repeat certain representations to the lender. These include:
Drawdown of loans and representations: As mentioned above, it is usual that you will have to repeat most if not all the representations before you can drawdown a loan. If there has been an actual event of default or a potential event of default, then the lender can refuse your request to drawdown any loan. Potential Event of Default generally means an event or circumstance that, with the giving of notice, the expiry of a grace period, the making of any determination under the finance documents or the fulfilment of any other applicable condition (or any combination of the foregoing), would constitute an event of default.
Information covenants: Most loan agreements require you to notify the lender of any event of default or potential event of default promptly upon it becoming aware of its occurrence.
Recommendations: Stress test your cashflows, check your loan arrangements, and if there are any concerns be open and transparent with your lenders. If a waiver is needed, request it as soon as possible.
If you would like to discuss any issues raised in this ebriefing, please contact Natalie Singh or Jon Coane.
Dementia currently affects 1 in 14 people in the UK. Many people will either know someone with dementia, have had to support and care for someone with dementia or have been diagnosed themselves.
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