Question to the Department for Business, Energy and Industrial Strategy:

To ask the Secretary of State for Business, Energy and Industrial Strategy, what assessment he has made of the potential merits of amending and lowering the seniority levels required to access the Coronavirus Large Business Interruption Loan Scheme to expand eligibility for that scheme.

Except in respect of a residential development facilities, a CLBILS facility must at all times during its life, rank on at least a pari passu basis with the most senior obligations (including secured and/or super-senior obligations, if any) of the Borrower. This includes from all collateral taken by any lender from the borrower unless the borrower is a financing vehicle, whereby this will include any collateral from any member of its Group.

There are certain carveouts from this requirement including collateral:

• with an aggregate value not greater than 10% of the value (determined by the lender in accordance with its lending policies) of all relevant collateral, and
• relating to asset and invoice finance facilities entered into in the ordinary course of business where the proceeds of such collateral would not be available to facilities other than such asset or invoice finance facility and where the lending policies and procedures would not require it to take security over such collateral.

This approach ensures that taxpayer interests are suitably protected when providing government guarantees for facilities of up to £200 million to mid-cap and large businesses which tend to have more complex capital structures.

The CLBILS is designed to provide temporary assistance to businesses that are suffering disruption to their cashflow due to lost or deferred revenues during the Covid-19 outbreak. In this situation, existing lenders to a business will need to be willing to accept a temporary dilution to their own seniority reflecting this generous assistance from the Government.