A reduction in revenue due to the negative effects of COVID-19 could result in the violation of one or more of these financial commitments, allowing the lender to accelerate the loan and assert its security rights. Whether the facility agreement requires the borrower to proactively inform the lender of these developments must be considered. The main points for borrowers and lenders are to ensure that they are aware of the terms of their loan agreement and that they fully understand them, and to continue to talk to each other. The more information lenders have, the easier it is for lenders to cooperate with the borrower in these difficult times. Ironically, it is more likely that a borrower with a diminishing ability to meet its financial obligations and payment obligations will request an increase in credit facilities to help manage cash flow. This raises a difficult business issue for the lender, which must take into account both the macro-economic outlook, the borrower`s position and the response to its challenges. In its circular of 18 March 2020, Addressed to all licensed banks operating in Oman, the Central Bank of Oman indicated that it had decided to take a number of measures from the date of the issuance of the circular, including „the acceptance of applications for loan/interest/benefit deferrals for the borrowers concerned, particularly SMEs having an immediate effect for the next six months, without prejudice to the classification of the risks of these loans.“ This circular gives all affected borrowers (particularly SMEs) the right to request a six-month deferral of loan/interest/earnings rates. This too must be considered in light of the contractual terms agreed between the borrower and the borrowers in the loan agreement. As the economic impact of Covid-19 (coronavirus) worsens, companies are increasingly facing unexpected challenges, particularly in meeting their loan contract obligations. Inevitably, this creates problems for borrowers with their lenders, which we look at the most important ones below.
From a documentary point of view, the provision of new lending facilities: after all, communication is the key in times of uncertainty. Ideally, a borrower will work proactively with their lender to ensure that their financing arrangements continue to function as well as possible. However, many borrowers would inevitably focus on the immediate daily challenges of their business. Loan agreements generally offer lenders a wide range of information rights (the violation of which could constitute a default event) that a lender could usefully highlight to a borrower whose attention would otherwise be difficult to attract.