Coronavirus

Since the financial crash, the crucial part of relationship banking has been pretty straightforward: offer borrowers cheap cash and become a core lender, then pitch for ancillary business. But the disastrous effects of Covid-19 on corporate finance mean that cozy relationships will be tested, with companies under pressure and in serious need of extra cash. We’ll soon know which relationships were real and which were not.

Denmark and Sweden unveiled a number of policies to combat the economic effects of the Covid-19 pandemic this week, with big changes to their funding plans. Sweden has decided to focus on the short end with an increase in treasury bill and commercial paper borrowing, while Denmark has chosen to increase its overall funding programme.

These are extraordinary and testing times for the global economy. But if there’s one thing that we have learned from past economic crises, it is that public sector institutions are crucial, both as borrowers keeping capital markets open and in their work channeling money to repair economic and human damage, and stimulate growth.

Sasol, the South African chemicals company, has unveiled a $6bn package of measures designed to shore up its business, which has been damaged by the spread of the Covid-19 virus and the collapse in oil prices.

The Reserve Bank of Australia (RBA) and Reserve Bank of New Zealand (RBNZ) acted this week to protect their economies against the effects of the Covid-19 pandemic.

Moody's has downgraded budget airline EasyJet and put other airlines on review for ratings cuts, raining more blows on an industry being pummelled by the coronavirus pandemic.

The Asian Infrastructure Investment Bank re-opened its headquarters in Beijing on Monday after being shut for weeks as a result of the outbreak of the coronavirus, which began in China but quickly spread across the world.

Three institutional investors pulled out of a private placement for London's Heathrow airport according to market sources, amid pricing volatility due to Covid-19 and as airports take stock of how much the virus will impact their businesses.

The crash in share prices as the coronavirus pandemic has gathered pace is soon likely going to force some sellers to execute equity block trades to cover loans secured against stock, or just to access capital quickly. But these sellers are going to have to stomach heavy discounts to get the liquidity required to execute trades, as one company proved on Monday night.

Some DCM bankers have started pitching bond buybacks to EM issuers after the sharp fall in bond prices, but there has been no uptake yet as despite expected slower growth, borrowers are reluctant to spend money when they have no confidence of regaining market access in the coming months.

Redemption requests have are hitting EM bond fund managers fast this week, making some of the opportunities created by extreme market volatility hard to seize.

The coronavirus crisis is shaking up companies' financing arrangements in the most drastic way since the 2008-9 financial crisis, as firms strive to secure liquidity for what are likely to be many tough months. So far there have been only a few high profile cases of companies drawing down revolving credit facilities, but this is expected to grow, as long-established norms crumble and new patterns emerge.