Squeeze on liquidity
Since the onset of the crisis in early March 2020 we have seen our clients respond to anticipated liquidity difficulties in a number of ways. Well-capitalised clients have been able to tap into readily available cash following strong periods of trading prior to the crisis. Others have drawn on committed facilities taking advantage of low interest rates that continue to prevail whilst some clients have brought forward strategic asset disposals to provide liquidity buffers. In addition to the above, as was anticipated in April, we have seen a significant upturn in enquiries and instructions in connection with fundraising by using a Jersey cash box structure. According to data maintained by Thomson Reuters, there have been 46 cash box structures launched in 2020 so far (up until the end of October) which, as illustrated in the graph below, is already in excess of the 44 cash box structures launched in 2009 at the peak of the global financial crisis.
Cash Box Secondary Issues
Source: Thomson Reuters
Cash box structures have been employed across a variety of sectors showing their versatility as a source of urgent liquidity as well as illustrating the impact of the coronavirus crisis across the global economy.
Cash Box Issues by Sector
Source: Thomson Reuters
The average value of each cash box has been GBP198,034,783 and 42 of the 46 identified structures involved the use of a new company incorporated in Jersey demonstrating the dominant position the jurisdiction enjoys for implementing fundraising in this manner.
On 4th September 2020 the Pre-Emption Group (PEG) extended its recommendation that investors, on a case-by-case basis, continue to consider supporting placings by companies of up to 20% of their issued share capital over a 12-month period. It remains to be seen whether PEG will extend this recommendation beyond 30th November 2020, with one view being that by then, almost 8 months into the pandemic, companies should have taken the necessary steps to manage their liquidity requirements without the need for emergency fundraising. The recent imposition of a second lock-down may be a relevant factor in the PEG extending this recommendation further into early 2021.
Due to the continued uncertainty in markets caused by the crisis, we expect cash box structures to remain, for the rest of 2020 and into Q1 of 2021, a popular and reliable source of fundraising. As the economic landscape begins to settle after the crisis we expect companies with strong non-cash balance sheets to avail of opportunities to make strategic acquisitions and bolt-ons which will require access to cash in short order.
The team at Appleby are extremely well placed to advise clients in all legal aspects of a cash box structure having assisted a number of clients in the implementation of such structures both recently and historically. To further expedite matters we can coordinate with our colleagues in Appleby Global Services who are able to assist with every stage of the incorporation of the entities required to implement a cash box structure and any other related services which may be required.
Corporate, Banking & Asset Finance, Corporate Finance, Derivatives, Fund Finance, Funds & Investment Services, Listing Services, Mergers & Acquisitions (M&A), Real Estate Finance, Structured Finance, Regulatory Advice
Banking & Financial Services, Funds & Investment Services, Private Equity
More changes to Jersey's Anti-Money Laundering Regime (AML)
Our experts look at latest proposals to the legal and regulatory anti-money laundering framework in ...
Establishing a single family office in Jersey
Want to know more about establishing a family office in Jersey? Find out what a family office is and...
Change of control of regulated entities in Jersey
Find out how Appleby Jersey has advised upon a number of changes of control scenarios in different c...
Trusts: Comparison between the Crown Dependencies
Our Private Client and Trusts specialists in Guernsey, Isle of Man and Jersey outline some of the ke...
Changes to the Jersey Competition Law Framework
Following the launch of the Government of Jersey's consultation on proposed changes to the competiti...
Jersey Property Unit Trusts and the Trust Regulation Service
Our Appleby team looks at HMRC's recently updated guidance on Jersey Property Unit Trusts (JPUTs) an...
Enforcement of security under the Security Interests (Jersey) Law 2012
Find out more about why the Security Interests (Jersey) Law 2012 (2012 Law) makes Jersey popular as ...
Listing Variable Funding Notes (VFNs) on The International Stock Exchange (TISE)
This article explores what a Variable Funding Note is and offers an introduction to what is required...
Listing High Yield Bonds on the International Stock Exchange (TISE)
High Yield Bond issuers and their advisers continue to favour listing on The International Stock Exc...
Fund Finance Laws and Regulations 2023 - Jersey
Fund finance is growing in Jersey. As an international financial centre (IFC) of choice for global i...