Corporates sigh over “lawyers’ dance” around loan contracts
VIDEO | “We don’t need 100 or 200 pages. 20 would be enough.” A challenge against banks in general – by European Energy’s legal head of banking and finance Rasmus Olesen over today’s legal rituals around corporate loan agreements – kicked off a tough but well-humoured battle in the final panel of Treasury 360° Nordic on Thursday.
“Rasmus, you are a lawyer …”
“Thanks for the insult.”
Two fault lines were in focus through Thursday’s closing panel in Stockholm: the one between corporate borrowers and their banker lenders – but also the line between those on either side that take a commercial view versus those focused on getting all the legal clauses water-tight.
The panel – titled “Funding: Who sets the terms, the bank or you?” – pitted corporate representatives Rasmus Olesen of European Energy and Kasper Christensen from Pandora against two bank reps: HSBC’s Alexey Sokolov and BNP Paribas’ Ulrik Ross. While he is himself a lawyer, Rasmus Olesen is irreverent versus his colleagues, especially those on the bank side. He sees the voluminous paperwork around the loans at a level that makes it a serious obstruction to doing business:
“I never experienced seeing a clause where I could say ‘this would fix a distressed situation’.”
The devil is in the legal detail
Bank-side representatives Sokolov and Ross agreed that it is much easier to reach constructive dialogue with corporate managers around the commercial terms than about legal detail. A challenging type of situation is when loan terms must be tightened because the corporate’s credit standing has deteriorated.
“As long as the goal posts stay where they were set from the beginning, there are good chances of good communications,” said Alexey Sokolov.
From the bank point of view, it can get problematic when a corporate professional moves from a highly credit-worthy corporation to one of lower rating – possibly expecting a similar treatment. That, s/he just won’t get. And while corporate pros Olesen and Christensen could ridicule the legal hassles brought on from the bank side, the bankers were not short of anecdotes featuring ridiculous expectations from the side of treasurers.
A reason to look at Germany?
On the more serious notes, both sides could naturally agree that collaboration to smoothen the processes is highly desirable.
“Maybe we should challenge our loan market associations to come up with the shortest form possible of loan documentation,” said Ulrik Ross, pointing to Germany as a possible role model.
The session was led by overall conference moderator Simon Hesse Hoffmann.
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