How has the global spread of coronavirus impacted the asset finance community? This timeline offers a blow-by-blow account:
A survey by invoice finance provider MarketFinance has found more than two-thirds of respondents (67%) believe government loans will not reach them in time and they will run out of cash before Easter (12th April).
Finance Ireland, a state-backed non-bank specialising in asset finance and leasing, has suspended a planned €100m (£85m)-plus initial public offering (IPO), the Irish Times reported.
The lender cited weakening market conditions in the wake of the coronavirus in recent weeks, for its decision to withdraw its IPO listing on the Irish stock exchange, scheduled for May.
The Coronavirus Business Interruption Loan Scheme (CBILS), unveiled by the Chancellor of the Exchequer earlier this month, has opened for applications from small businesses today.
The CBILS supports a wide range of business finance products, including invoice finance and asset finance facilities as well as term loans and overdrafts.
OneSavings Bank, a provider of asset finance, saw its share price fall yesterday despite it posting strong full-year 2019. results.
The UK-based challenger bank declined to issue a full-year outlook over coronavirus-related uncertainty in its results statement, prompting a share price fall.
The bank “set a new 52-week low during trading on 19 March when it reached 155.30. Over this period, the share price is down 43.82%,” according to the FT. On 20 March its share price closed at 210.00.
Financing of UK SMEs under the Coronavirus Business Interruption Loan Scheme (CBILS) is to become available in the week commencing 23 March, the British Business Bank (BBB) has confirmed.
A recommendation by the UK government to limit mass gatherings in the wake of the coronavirus has seen the International Asset Finance Network (IAFN), a provider of events for the leasing sector, cancel a London conference in June.
Flight bans imposed by governments around the world to manage the coronavirus pandemic will significantly shake up aviation financing, according to Scope, a German-based credit rating agency and financial analyst.
The trade body for leasing and asset finance brokers in the UK has instructed its head office staff to work remotely from home as coronavirus takes its toll on the City workers travelling to their physical workplaces.
National Association of Commercial Finance Brokers (NACFB) has instructed its team of 16 to work from home as the offices at 33 Eastcheap will be closed “until further notice”.
UK government unveils Coronavirus Business Interruption Loan Scheme as part of its Spring Budget incentives targeted at small business. The stimulus offers asset finance and invoice finance through approved lenders to a £1.2m limit.
In its first signal that the coronavirus pandemic is hitting the US equipment and leasing sector, a national survey identified a confidence decline of 21% in February this year, against January, according to the Equipment Leasing & Finance Foundation, a non-profit industry research body.
US equipment leasing trade body cancels April events
Equipment Leasing & Finance Association (ELFA), a trade association for the US leasing equipment sector, announces the cancellation and postponement of its April events due to coronavirus threat.
The events cover the Women’s Leadership Forum (April 20-21), the 32nd Annual National Funding Conference, (April 21-23), the Best Practices Roundtables (April 21) and the Emerging Talent Networking Event (April 21), all of which were to take place at the Hilton Palmer House hotel in Chicago, US.
The government, in concert with the Bank of England, today announced a raft of measures to immunise the economy – if not its people – from the global effects of a coronavirus outbreak, which this afternoon was declared a global pandemic by the World Health Organization.
The Leasing Foundation (UK) postpones networking London event
The non-profit group tells supporters that it will postpone a key event in its diary, Expect the Unexpected, a breakfast meeting for 10 March. The venue organiser, RBS, said that according to bank guidelines in the current environment, the venue would no longer be available.
Mark Carney, the outgoing governor of the Bank of England, outlined plans to help businesses in the event of a major outbreak of coronavirus. Carney told MPs on the Treasury select committee that the economic effects of Covid-19 could last up to six months and that there would be disruption, not destruction, to the UK economy.
Vessel leasing falls by two-thirds since December
The Financial Times reported that a significant drop in the cost of vessel leasing offers clues on the damage done to the shipping sector by Covid-19.
The Baltic Dry index – a measure of shipping costs for a wide range of bulk commodities such as coal, iron ore and grain – which shows rates for leasing the largest vessels have dropped two-thirds since the start of December “and are significantly below the average level of the past 20 years”, the FT reported. This is indicative of the sharp reduction in demand from China, the world’s biggest consumer of iron ore and other industrial commodities.
Figures released by the Equipment Leasing & Finance Association (ELFA), a trade association for the US leasing equipment sector, showed that new business volume for January 2020 was $9.2bn, up 28% year-on-year from January 2019.
The EFLFA figures were released ahead of the US recording any effects on the economy from the coronavirus or Covid-19, something that the industrialised Western nations are beginning to predict will have an impact as February comes to an end.
Aviation financing vulnerable to Covid-19
Scope, a German-based credit rating agency and financial analyst, reported that aviation finance is at risk of severe coronavirus-related disruptions.
“High aircraft values and low lease-rate factors do not properly reflect the commercial and operating risks facing airlines leaving the aviation finance industry in a vulnerable state in 2020 even before the extent of the coronavirus outbreak became clear,” said Helene Spro, director of project finance at Scope.
In a sign the Covid-19 epidemic is hitting the aviation leasing sector, China is in talks to seize control of troubled conglomerate HNA Group, the majority shareholder of Irish aviation lessor Avolon, Bloomberg reported recently.
The government of Hainan, an island province in the south where HNA is based, may sell off the airline’s assets after the outbreak of the coronavirus on mainland China hurt the airline’s ability to meet its financial obligations, according to the report citing people familiar with the plans.
Coronavirus puts pressure on Chinese leasing sector
Fitch Ratings, a global financial information services group, reported that the global spread of coronavirus is putting pressure on small independent Chinese leasing companies.
“The delinquencies of the leasing subsidiaries of banks and significant SOEs are likely to stem from their aircraft-leasing business. Fitch estimates about 20% of total leased assets for lessors that are active in aircraft leasing are exposed to local airlines, whose revenue and cash flow are suffering from significantly reduced air traffic,” Fitch said in a statement.
Aviation leasing may gain from coronavirus outbreak
Avolon, one of the world’s largest aircraft leasing companies, told the Irish Times that the leasing sector stands to benefit from the coronavirus outbreak, as airlines look to refinance their planes in an effort to hold on to their working capital.
A sale-and-leaseback trend among airlines “will unquestionably be accentuated now, with the coronavirus,” Domhnal Slattery, chief executive of Avolon, said after the company posted $718m (€658m) in net income for 2019. “The phone hasn’t stopped ringing,” Mr Slattery said.
Covid-19 prompts Chinese airlines to refinance fleets
Global aircraft leasing company Avolon told the Financial Times that Chinese aircraft carriers are reaching out to do sale-and-lease-back transactions.
Domhnal Slattery, chief executive of Avolon, said carriers such as Cathay Pacific, the Hong Kong-based company, are cutting capacity significantly. Others are seeing their forwards booking down and so their cash positions have worsened, he said.