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The coronavirus is currently the number one topic - and it is clearly in the spotlight here as well: Will the billions in financial aid and the tax policy measures of the German government be sufficient to cushion the effects of the pandemic? What specific questions are companies and financial institutions facing, and which instruments should companies now make greater use of to secure their liquidity?

Martin Hammer, CEO of enomyc, talks about this in our latest blog article. If you prefer to listen to what he has to say, you can do so by clicking onSoundcloudSpotifyApple Podcasts oder Deezer.


Mr. Hammer, what has changed for you because of the coronavirus? Are you currently working more in your home office?

Not much has changed for me - thank God I'm not infected. But my day-to-day work has changed significantly: We are currently switching completely to remote. As consultants, we have been on the road with our laptops for many years and are therefore relatively flexible. And of course Skype, telephone or Zoom conferences, and SharePoint are also part of our everyday work. But: The current situation makes it increasingly difficult for us to see our customers "face-to-face" with our consulting approach. There are certain consulting services - always depending on the industry and the mandate - that must take place on site, where you can't do without direct customer contact like operational issues in manufacturing companies, but also issues that affect the retail sector.

What do you think of the German government's economic and financial policy so far? Short-time work is one issue, and tax relief. Do you think the current measures - the billion-euro aid program or the tax policy measures - are enough to cushion the impact of the pandemic?

To quote the words of our Federal Chancellor: After all, there is no alternative to the measures. The entire German industry is at a standstill and at the same time is standing tail. Some of these measures are new and no one can predict exactly how developments will play out. At the moment, there is a relatively high level of restlessness. From the inquiries we receive we have noticed that there is a lack of planning. Of course, many companies have applied for furloughs, and I think that's the order of the day. There are also initial recommendations on tax relief, but these have to be implemented in such a way that they will have an impact on customers' liquidity. I think the German government is on the right track here.

And as for the billion-dollar aid program?

There is no alternative to this either. The KfW has increased its credit program by 90 billion to 540 billion EUR. We have doubts as to whether this 90 billion additional total credit will be sufficient for the crisis that is currently rolling toward us like a tsunami. Furthermore, we currently have the situation that these KfW loans - which are backed by counter-guarantees - are only granted at 80 percent per customer, which means that the principal bank or the financing savings bank is supposed to take 10 to 20 percent into its own exposure. I have significant doubts that this practice will prevail, simply because the risk for individual banks is very high. Leading banks that lend 10 billion, for example, still have a residual risk of one to two billion.

Now this week, I understand, there will be talks in Brussels about increasing the counter-guarantee to 100 percent, so that banks can hand over virtually 100 percent of a counter-guaranteed loan to companies seeking credit.

These loans worth billions will help, because - and I quote my colleague Georgiy Michailov, who wrote today on Linkedin: "At the moment, it is not the one who has the best business model that will survive, but the one who manages to secure sufficient liquidity!", but: Of course, from my point of view, they will also have a lasting negative impact on the economy.


Martin Hammer CEO enomyc

Can you give a concrete example from practice?

A healthy company that generates 100 million in sales and simply has an exemplary 30 million in credit volume with various financing institutions, but generates an operating result, i.e. EBITDA, of 10 million, has a debt ratio of 3:1: 30 million in debt to 10 million in operating result. 

What happens next? Now this company will apply for a loan, perhaps for an additional 10 million credit line. Then it will have a 40 million credit line and will survive the current crisis, but it will still have 10 million more in credit debts that will have to be repaid at some point.

If the effects of the Corona crisis are still being felt next year, we will have the following situation - and this is the reality: Such a company will in all probability only have an operating result of 8 million due to this whole market dislocation - but will then have debts of 40 million. Then we are talking about five times the leverage! That is then a restructuring project.

In other words, we have two different components running against each other: We have perfectly healthy companies that now have to take on debt due to the extraordinary situation. They then have to take responsibility for the impact on their earnings situation due to the corresponding market development this year or next year - with equally higher debt. In other words, the full impact of all this borrowing will not be felt until 2021 and 2022. And that, of course, is something that perhaps no one is interested in at the moment, because everyone is thinking about the survival of the company for the time being - which I can absolutely understand - but which will result in catastrophic economic damage in the medium and long term.


Are companies already actively contacting you with specific questions and if so, can you name some of them?

Yes, companies as well as financial institutions and the Sparkassen turn to us with the first loan applications from their respective customers who want to carry out a plausibility check of their crisis planning. The aim here is to prevent companies that are perhaps already struggling or less successful from getting under a Corona umbrella, which would then theoretically lead to the same result - namely insolvency - in one- or two-years’ time. Those should be discussed, based on history, perhaps now - that's certainly an issue. That is why financial institutions, in my view, will seek appropriate second opinions from a third party, that is: from auditing firms, law firms and consulting firms. We also receive direct inquiries from customers who ask us about emergency measures and also want to know how to handle the administrative aspects of granting loans. Thank goodness we have extensive experience in this area.

However, it is still not clear: Will it be 80, 90 or 100 percent counter-guaranteeing? How should the entire procedure be viewed? We are also noticing a great deal of uncertainty among the financial institutions, which will certainly determine the relevant conditions at the highest level, directly with the federal government and all those involved there. And the whole thing has to go through Brussels in the end. So, it's a difficult situation for us. We are in the starting blocks, providing initial assistance, but the roadmap for each company has not yet been defined. First, the framework conditions have to be defined in such a way that we can implement them later.

There are healthy businesses, companies that are currently restructuring, but also companies that are currently in insolvency.

Indeed. With companies that are currently in insolvency, one might first think that they no longer need help. That is too short-sighted: Today's professional insolvency administrators take a holistic approach to restructuring and don't just wind things up. We ourselves also look after companies that are to be continued out of insolvency, such as suppliers. Let's take parts suppliers for Volkswagen, for example: As far as the current, Europe-wide closure of all VW plants is concerned, this will have effects that I am not able to name. I fear bad things because, conversely, that means immense additional liquidity that these companies would have to raise – all in insolvency environment - that is certainly not easy.

The healthy, established companies will have it easiest, but there are uncertainties here, too. Let me give you an example from recent press reports: TUI has suspended all business operations. All hotels are closed, the airlines are at a standstill, and all travel has been canceled. At the moment, there is a standstill - and that at a major global corporation. We are talking about different credit lines and, of course, different credit requirements that are available to save tens of thousands of jobs. This will not be cushioned by a furlough scheme alone. After all, all other costs are continuing.

It is difficult to actively process the credit lines in the present. I assume that the federal government will very quickly ensure that we have planning security, which will allow us all to act relatively quickly. There will certainly be no weekends in the next few weeks.


How do you support companies and what are your current recommendations?

At the moment, every company is only concerned with securing liquidity. In fact, it's as if you were on the verge of insolvency. What do you do? You do liquidity planning, which you continue on a weekly basis to see what's coming in and going out. This is done on a daily basis.

Next, it's all about the quick wins: immediate workforce adjustments, short-time work, tax issues. The German government is offering, among other things, that advance tax payments and social security contributions can be deferred - all the stops should be pulled out now to preserve liquidity.

Sure, one or the other may even have business interruption insurance, but in the end, in very simplified terms, it's all about consistent day-to-day or hour-to-hour liquidity management. All investments - everything that has to do with spending money - should now be reduced to an absolute minimum.

Liquidity management is our bread and butter - it's what we've been about for almost 20 years. We have a large number of additional levers that we can use to manage our customers' liquidity and serve them accordingly.

Are there also winners in this crisis? Which industries do you think are benefiting strongly from the current situation?

The whole e-commerce business is set to explode over the next few months. As we can see from the press, Amazon is currently looking for 100,000 new workers - that's a gigantic number. And of course, there will be other industries that will be beneficiaries.

All those who are already very digitally and progressively positioned today will certainly emerge from this crisis as winners. And allow me this comment: lawyers, tax advisors, auditors and consultants will also be among them. Last but not least, I personally believe that divorce lawyers will also benefit should the curfew remain in place for months.

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