As a result of the current crisis the Interest Coverage Ratio (ICR) of the Client became a default issue, because the income of the property was turnover related. This issue also meant that there was a default on the Loan to Value ratio.

 

Cycas was involved with the negotiations for the restructuring of the loan. This meant analysing the situation, meeting with the bank and negotiating the step-by-step restructuring. Cycas concluded that the bank would lose money with a forced sale and that the SWAP rate was very high compared to the market.

 

Cycas first proposed buying-out the SWAP in order to lower the interest payable and bring the ICR to a positive level, thus allowing for loan repayment. Secondly to defer part of the interest margin to the moment of final loan repayment. Thirdly to take out the LTV clause from contract. The bank agreed on the package which cost the lender only £1M, a fraction of what would have been paid, if the ICR had been resolved in a conventional way.