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Commercial Awareness Update April 2020
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<blockquote data-quote="Jaysen" data-source="post: 27372" data-attributes="member: 1"><p>Welcome to the second update of April!</p><p></p><p>The articles this week:</p><p></p><p>[USER=4295]@Jiraiya[/USER] - SoftBank abandons WeWork Buyout</p><p>[USER=4422]@Curtley Bale[/USER] - Barclays set out climate change goals </p><p>[USER=3460]@Alice Manners[/USER] - Retailer’s refusal to pay rent </p><p>[USER=3442]@Rachel S[/USER] - COP26 has been postponed </p><p>[USER=1550]@Sairah[/USER] - Threat to Pension Funds Market </p><p></p><p style="text-align: center"><strong><u>SoftBank abandons WeWork Buyout – (by [USER=4295]@Jiraiya[/USER])</u></strong></p> <p style="text-align: center"></p><p><strong><u>The Story:</u></strong></p><p></p><p>Despite already having invested $10.5 bn in WeWork since its listing fiasco, Softbank, the Japanese tech investment group, announced to back out from a $3bn tender offer for shares of WeWork, the co-working space’s start-up. </p><p></p><p>In its justification, Softbank quoted unmet contractual conditions of the deal, including the failure to restructure a joint venture in China, and criminal and civil inquiries into WeWork. The suspicion is that the group is no longer interested in a sinking ship. </p><p></p><p><strong><u>Impact on Businesses and Law Firms: </u></strong></p><p></p><p>This move is no surprise considering Softbank’s financial situation before the announcement. The firm is launching an emergency $41bn asset sale and a $2tn share buyback, prompted by activist shareholders to defend its freefalling share prices. It recently refused to lend to OneWeb, a satellite internet start-up backed by the fund, which was once valued at $3.3.bn and is now under liquidation. </p><p></p><p>Considering its staggering $2.2bn annual loss, the news is a nightmare to WeWork. Its occupants are demanding rent concessions or cancellations due to worldwide social distancing measures. Investors’ confidence is shattered as Softbank’s insistence to pull out after investing so much speaks volumes about its outlook. </p><p></p><p>There are increasing signs from the market that the start-up boom of the last decade is coming to an end as funds and corporations are scrambling for cash to stay afloat. In good times, any “techie” idea could be boasted as the next Facebook just like the dot-com era in the 90s. But as history has taught us, floundering businesses will be revealed in bad times, perhaps for a good cause. </p><p></p><p>As corporate practice is in a downturn, law firms like Hogan Lovells and Latham & Watkins have started retraining some of their lawyers in restructuring and insolvency practices to handle a rush of businesses in financial stress or in bankruptcy. Could WeWork become one of them? </p><p></p><p style="text-align: center"><strong><u> Barclays set out climate change goals (by [USER=4422]@Curtley Bale[/USER])</u></strong></p> <p style="text-align: center"></p><p><strong><u>The Story:</u></strong></p><p></p><p>Europe’s largest financier of fossil fuels, Barclays, has declared its ambition to fall in line with the climate change goals established by the Paris Agreement in 2015. Barclays will target net-zero carbon emissions by 2050, planning to account for its own emissions as well as that of its customers. This announcement comes following large shareholder pressure in January to facilitate change. </p><p></p><p><strong><u>Impact on Businesses and Law Firms: </u></strong></p><p></p><p>As the seventh-largest global financier of fossil fuels, Barclays has faced intense scrutiny for its record. Since 2015, Barclays has lent around £100bn to fossil fuel-using companies. With that in mind, the climate change goals may be a step towards improving its image as a responsible lender whilst also satisfying its shareholders. Green/ethical investments are becoming an increasingly important factor for shareholders, and making commitments to change its environmental stance is likely to lead to the company becoming a more sustainable investment in the future. </p><p></p><p>Alongside the climate change goals, Barclays has also committed to investing £175bn over the next five years in environmental innovation as well as granting £100bn of green financing by 2030. This may put pressure on fellow UK banks such as HSBC who have lent $86.5bn to the largest carbon emitters since 2015. Whilst Barclays is a long way behind the global leader of financing fossil fuel, JP Morgan Chase ($268.59bn since 2015), its move towards being a more responsible business may help the company sustain its reputation in the market as a leader. </p><p></p><p style="text-align: center"><strong><u>Retailer’s refusal to pay rent – (by [USER=3460]@Alice Manners[/USER])</u></strong></p> <p style="text-align: center"><strong><u></u></strong></p><p><strong><u>The Story:</u></strong></p><p></p><p>JD Sports has followed in Primark’s footsteps and refused to pay its rent, after being forced to close its UK stores. Burger King and Topshop have also announced similar actions. </p><p></p><p><strong><u>Impact on Businesses and Law Firms: </u></strong></p><p></p><p>Other high street businesses are likely to follow suit, with H&M asking for waivers on its rent and service charge bill.</p><p></p><p>Intu Properties have also spoken out after they only received a third of the rent owed to them last week, saying that they had their own staff to consider. They have offered to cut service charge fees, and many commercial landlords are trying to mitigate issues being faced by tenants, knowing reputation is at stake. However, Intu have their own debt and have said they are not able or willing to bankroll well-capitalised brands who did not want to pay their rent. </p><p></p><p>The government has allowed a three-month mortgage payment holiday, but no rent holiday. However, landlords have been prevented from evicting tenants during this time.</p><p></p><p>Even if rent is allowed to be put on hold, this highlights again the worrying future of the high street. Stores like Primark rely entirely on in-store sales so it is difficult to see how they will make up for their losses during this time. Businesses will be looking to plan for the future and how they expect to operate in 2021, but we expect to see many businesses suffer. Carluccio’s, for example, has recently announced that they have entered into administration. </p><p></p><p>Lawyers will be trying to navigate the unprecedented circumstances, advising landlords on whether to bring proceedings and tenants on what their contracts and the circumstances may allow. As the country continues in lockdown, tenants have little chance of being replaced and therefore may feel more confident withholding payments and trying to negotiate agreements.</p></blockquote><p></p>
[QUOTE="Jaysen, post: 27372, member: 1"] Welcome to the second update of April! The articles this week: [USER=4295]@Jiraiya[/USER] - SoftBank abandons WeWork Buyout [USER=4422]@Curtley Bale[/USER] - Barclays set out climate change goals [USER=3460]@Alice Manners[/USER] - Retailer’s refusal to pay rent [USER=3442]@Rachel S[/USER] - COP26 has been postponed [USER=1550]@Sairah[/USER] - Threat to Pension Funds Market [CENTER][B][U]SoftBank abandons WeWork Buyout – (by [USER=4295]@Jiraiya[/USER])[/U][/B] [/CENTER] [B][U]The Story:[/U][/B] Despite already having invested $10.5 bn in WeWork since its listing fiasco, Softbank, the Japanese tech investment group, announced to back out from a $3bn tender offer for shares of WeWork, the co-working space’s start-up. In its justification, Softbank quoted unmet contractual conditions of the deal, including the failure to restructure a joint venture in China, and criminal and civil inquiries into WeWork. The suspicion is that the group is no longer interested in a sinking ship. [B][U]Impact on Businesses and Law Firms: [/U][/B] This move is no surprise considering Softbank’s financial situation before the announcement. The firm is launching an emergency $41bn asset sale and a $2tn share buyback, prompted by activist shareholders to defend its freefalling share prices. It recently refused to lend to OneWeb, a satellite internet start-up backed by the fund, which was once valued at $3.3.bn and is now under liquidation. Considering its staggering $2.2bn annual loss, the news is a nightmare to WeWork. Its occupants are demanding rent concessions or cancellations due to worldwide social distancing measures. Investors’ confidence is shattered as Softbank’s insistence to pull out after investing so much speaks volumes about its outlook. There are increasing signs from the market that the start-up boom of the last decade is coming to an end as funds and corporations are scrambling for cash to stay afloat. In good times, any “techie” idea could be boasted as the next Facebook just like the dot-com era in the 90s. But as history has taught us, floundering businesses will be revealed in bad times, perhaps for a good cause. As corporate practice is in a downturn, law firms like Hogan Lovells and Latham & Watkins have started retraining some of their lawyers in restructuring and insolvency practices to handle a rush of businesses in financial stress or in bankruptcy. Could WeWork become one of them? [CENTER][B][U] Barclays set out climate change goals (by [USER=4422]@Curtley Bale[/USER])[/U][/B] [/CENTER] [B][U]The Story:[/U][/B] Europe’s largest financier of fossil fuels, Barclays, has declared its ambition to fall in line with the climate change goals established by the Paris Agreement in 2015. Barclays will target net-zero carbon emissions by 2050, planning to account for its own emissions as well as that of its customers. This announcement comes following large shareholder pressure in January to facilitate change. [B][U]Impact on Businesses and Law Firms: [/U][/B] As the seventh-largest global financier of fossil fuels, Barclays has faced intense scrutiny for its record. Since 2015, Barclays has lent around £100bn to fossil fuel-using companies. With that in mind, the climate change goals may be a step towards improving its image as a responsible lender whilst also satisfying its shareholders. Green/ethical investments are becoming an increasingly important factor for shareholders, and making commitments to change its environmental stance is likely to lead to the company becoming a more sustainable investment in the future. Alongside the climate change goals, Barclays has also committed to investing £175bn over the next five years in environmental innovation as well as granting £100bn of green financing by 2030. This may put pressure on fellow UK banks such as HSBC who have lent $86.5bn to the largest carbon emitters since 2015. Whilst Barclays is a long way behind the global leader of financing fossil fuel, JP Morgan Chase ($268.59bn since 2015), its move towards being a more responsible business may help the company sustain its reputation in the market as a leader. [CENTER][B][U]Retailer’s refusal to pay rent – (by [USER=3460]@Alice Manners[/USER]) [/U][/B][/CENTER] [B][U]The Story:[/U][/B] JD Sports has followed in Primark’s footsteps and refused to pay its rent, after being forced to close its UK stores. Burger King and Topshop have also announced similar actions. [B][U]Impact on Businesses and Law Firms: [/U][/B] Other high street businesses are likely to follow suit, with H&M asking for waivers on its rent and service charge bill. Intu Properties have also spoken out after they only received a third of the rent owed to them last week, saying that they had their own staff to consider. They have offered to cut service charge fees, and many commercial landlords are trying to mitigate issues being faced by tenants, knowing reputation is at stake. However, Intu have their own debt and have said they are not able or willing to bankroll well-capitalised brands who did not want to pay their rent. The government has allowed a three-month mortgage payment holiday, but no rent holiday. However, landlords have been prevented from evicting tenants during this time. Even if rent is allowed to be put on hold, this highlights again the worrying future of the high street. Stores like Primark rely entirely on in-store sales so it is difficult to see how they will make up for their losses during this time. Businesses will be looking to plan for the future and how they expect to operate in 2021, but we expect to see many businesses suffer. Carluccio’s, for example, has recently announced that they have entered into administration. Lawyers will be trying to navigate the unprecedented circumstances, advising landlords on whether to bring proceedings and tenants on what their contracts and the circumstances may allow. As the country continues in lockdown, tenants have little chance of being replaced and therefore may feel more confident withholding payments and trying to negotiate agreements. [/QUOTE]
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