Update on Coronavirus
Date 16 March 2020
Type Corporate News
Dear Clients, Investors and Friends of Alantra,
As the COVID-19 situation continues to evolve, at Alantra we have been continuously monitoring the situation. We have acted quickly and swiftly to implement the measures necessary to ensure the health and safety of all our professionals and to provide continuity to our clients.
How our offices are operating
As a global business, we have been responding to the impact of the virus since January. Our Shanghai team was the first affected. We immediately transitioned them to work remotely from their homes where they quickly adapted to their new situation, established priorities and maintained business continuity. After almost two months, the team is now back in the office.
Our team in Milan has been working from home for over three weeks. There will be more teams working remotely in the coming weeks, including Copenhagen, Stockholm, Vienna, Brussels, the US and Madrid, our largest office.
How we are working with clients
Alongside our clients, we have adapted to a “new normal” where travel has been severely restricted and video and telephone conferences have replaced physical meetings.
In line with our Group Business Continuity Plan, our operating systems are set up to avoid any disruption to our daily activities. They are accessible from any location via a range of devices and our professionals connect using VPN access, thereby ensuring a secure connection to our core infrastructure.
How this is impacting our business
The clients in our investment banking practice are being affected by this crisis, with companies across a range of sectors already anticipating a decline in their revenues and cash flow generation during the first half of this year. We are continuing to stay close to our clients, providing a full independent advisory service, anticipating solutions for both the current transactions we are undertaking and the potentially new situations that will occur as a result of this new environment. We are convinced the best way to mitigate the immediate potential financial risks posed by this crisis is to act now to ensure appropriate financing alternatives are in place to address likely shortages in working capital, as well as to finance inventories and increased demands.
In our asset management business, we are closely monitoring the evolution and potential impact in our portfolio companies. We are operating under the assumption that prior revenue budgets will not be met this year in most of our businesses and that unexpected supply chain issues will likely take place. As relevant owners of private and public companies, real assets (real estate and infrastructure), but also as lenders of credit, either through funds or managed accounts, our first priority is the health of our people. This will enable us to continue protecting our investments on behalf of our investors. Second, we encourage our management teams to act quickly to control costs and preserve cash. Our companies need to prepare for the worst while, at the same time, remain determined to take advantage of the opportunities provided by the upcoming temporary downturn. As investment managers, we are trying to accommodate our portfolios to minimise the abovementioned risks but also expect to take advantage of recent market dislocations. The liquidity available in our funds and mandates allows us to support our portfolio companies or assets but also execute new potential investments.
For our Credit Portfolio Advisory team, 2020 had begun with strong deal volume as many banks across Europe grappled with how best to deal with the twin challenges of the ECB’s stringent approach to NPEs (broadly, reporting and impact of IFRS 9, management and deleveraging) and the increasing need to shift to more “flexible” balance sheets and liquid underlying credit portfolios. Further, wholesale and third-party funding remains key to both deleveraging transactions and supporting new lending, including for many challenger banks and non-bank lenders. We anticipate that banks will want and need to continue down their current path whilst remaining supportive of their underlying clients through these challenging circumstances. Whilst prices for collateral assets (e.g. real estate) and acquisition financing (e.g. Market, GACS & HAPS) will continue to be monitored, we would expect the ECB to continue to require banks to deleverage “problems of the past” while providing some leeway to banks for supporting “good book” clients that are experiencing short to medium term pressures on their businesses. As a result of these two factors, we would expect sellers to continue preparing their 2020 transactions but most likely with delayed timelines into the second half of the year.
As events continue to move at fast pace, we will remain vigilant and provide updates with full transparency.