The current environment is presenting all of us with many new challenges and a world of unknowns. The US Labor Department reported that, in the week ending March 14, 2020, 281,000 Americans filed unemployment benefits for the first time. A Goldman Sachs report predicts that another 2.25 million Americans have filed initial unemployment claims last week. Most states have already, or plan to, enact some form of reduced operations or “shelter in place.”
Over the past few weeks, the team at Carl Marks Advisors has been in the thick of difficult discussions with middle-market companies, lenders and other advisors to help them to navigate this challenging environment. We’ve been sharing—and hearing—about what businesses across some of the most affected industries are experiencing, as well as the actions to take now in order to survive in the near-term while also creating pathways for future opportunities.
Cash is now king for middle-market companies in impacted industries. Operators are drawing down on available lines of credit, cancelling capex investment and deferring non-essential vendor payments. Many are weighing the difficult decision of furloughing or terminating non-essential personnel. While it is unknown how long the current situation will persist, companies are hunkering down for an extended timeframe by minimizing their cash burn.
Carl Marks Advisors is seeing some lenders and financial sponsors assume a “wait and see” posture, holding for a policy response on government assistance or further clarity on insurance provisions. However, we believe management teams, lenders and advisors need to act and begin preparations now. Making critical decisions today and putting response plans in place quickly will be key for businesses in the most harshly affected industry sectors to survive this situation. It will also be vitally important for companies across the board as they work to rebuild once we get to the other side of the current crisis environment.
The four sectors below are facing enormous challenges. We at Carl Marks Advisors wanted to share our thoughts with you on how the coronavirus outbreak is impacting them and what companies in these industries can do to overcome the trials ahead.