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10 FOCUS FORMER EXPERIENCES TAKEN INTO ACCOUNT Even if the credit institute may always have received punctual interest and amortization payments from the debtor in the past, if the management or shareholders have not acted in compliance with the agreements, then here, too, covenants will more likely be included in new loan agreements. As an example: if withdrawals and/or additional investments are made without notifying the bank, or only later informing it, then this is not exactly conduct prone to promote trust. Companies that make use of loans must therefore always be aware of how their actions could be judged from the bank’s point of view. REALISTIC COMPANY PRESENTATION SOUGHT How a company presents itself to the bank is of decisive importance to the granting of credit. A company whose presentation is overly deficient is damaging its own credit rating. However, an all too positive presentation should also be avoided, since then the bank will be likely to set the demands THOMAS UPPENBRINK Owner of Thomas Uppenbrink & Collegen GmbH, Autax Consilium, Solventum GmbH, and Pro Economica Beteiligungs- und Ver- waltungsgesellschaft mbH with the functions of insolvency administration, company reor- ganization, debt-relief strategies, and crisis management. He is regularly commissioned by German courts as an expert consultant in cases of disputes between insolvency admi- nistrators and tax consultants with regard to questions of fees and related contestations. MICHAEL PRÜMER For 24 years, the banker and business ma- nagement graduate Michael Prümer held senior positions at Deutsche Bank, mainly in the lending business with medium-sized customers. Since 2001 he has been working as an independent consultant for SMEs. With the main focus on bank communication, he supports companies to present themselves to banks and advises them in banking and especially security matters. As a partner for Thomas Uppenbrink & Collegen GmbH, he advises in the areas of financing and restruc- turing concept and corporate restructuring. for liquidity, profit, and sales forecasts in the covenants so high that complications will arise at the latest with the first quarterly figures, and the bank will be able to assert its rights pursuant to the subsidiary agreements, which is what happens as a rule. That is why it is very important for the entrepreneurs, chief executives, tax consultants, or auditors conducting the negotiations in the interest of their clients not to set the requirements in the covenants so high that the company cannot adhere to the agreements later. Even within the scope of the “predictive power” in the estimation of Basel II, it is important not to make the estimates too poor nor too optimistic. It is better to discuss poor figures with the bank consultant than to be in breach of contractual agreements later. PSI Journal 4/2016 ADVANTAGES FOR WELL-RUN COMPANIES Companies and executives who have their companies under control, who manage companies with and through figures and make the decisions, will tend to gain advantages rather than disadvantages by accepting covenants – as long as they pay attention to their credit ratings and their ability to service their debts, and fulfill all subsidiary agreements. Companies that fulfill all the agreements with the banks benefit as a rule from better terms as well as lower requirements with regard to securities. So companies should not lose sight of these two decisive advantages. What borrowers are not always aware of is that covenants in loan agreements cannot simply be whisked aside if specific figures or requirements are not met. At the latest after the economic crisis, financial institutions will set the bar very high indeed – not only for companies adversely affected by the crisis, but increasingly also for those hitherto judged to be sound. Thomas Uppenbrink, Michael Prümer <

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