Refinancing and restructuring

Refinancing is appropriate where an existing facility no longer fits the business: pricing is uncompetitive relative to current performance, the tenor is too short for the underlying asset or cash flow, financial covenants have become restrictive, or the incumbent lender's risk appetite has shifted. It is also used to release equity from an asset that has appreciated or deleveraged since the original facility was arranged.

Special-situations refinancing applies where a business is under pressure — a covenant breach, a maturing facility the incumbent will not renew, or a temporary liquidity shortfall — and needs capital on a shorter timetable than mainstream lenders typically offer, provided the underlying trading case remains credible.

A new facility is arranged to repay the existing lender in full, with proceeds released to the borrower net of any break costs, prepayment penalties or exit fees specified in the original documentation. Where equity release is the objective, the new facility is sized above the outstanding balance, subject to updated valuation or earnings-based sizing.

Bridge finance is sometimes used as an interim step ahead of a longer-term refinancing, sale or capital raise, providing short-term capital secured against the asset or business while a permanent solution is arranged, and is typically repaid within six to eighteen months.

New lenders assess current trading or asset performance rather than the position at the time the original facility was arranged, so improved earnings, a de-risked tenant base or reduced leverage since origination directly support better terms. The reason for the move — cost, tenor, covenant relief or lender exit — is examined to confirm it reflects the borrower's position rather than distress being carried over unaddressed.

Where covenant breaches or arrears exist, specialist lenders will still assess the underlying business but require a clear, credible recovery plan, updated financial forecasts and often closer reporting or monitoring covenants than a conventional facility.

Conventional refinancing on improved terms is typically priced in line with, or below, prevailing rates for the underlying asset or facility type, given the demonstrated track record. Special-situations and bridge capital is materially more expensive, often 10–18 per cent per annum, reflecting compressed timelines and elevated risk.

Exit and prepayment costs on the existing facility, along with new arrangement and legal fees, should be weighed against the savings or equity released; refinancing is not always economic if the residual term on the current facility is short.

GFG reviews the existing facility documents, current financial or asset performance, and the objective — cost reduction, tenor extension, equity release or urgent capital — before approaching lenders suited to the specific position, including specialist providers where the business is under pressure.

Straightforward refinancing of a performing facility typically completes in four to eight weeks; special-situations capital can be arranged faster where the timetable requires it, though on correspondingly tighter terms.