Supporting strong management teams and viable British businesses: Q&A with Stuart Blair and Stewart Haworth, directors of debt finance at OakNorth Bank

Stewart Haworth & Stuart Blair Oak North Bank

OakNorth Bank is sector-agnostic, focusing mainly on lower mid-market businesses and established property developers/investors, and is active throughout England with offices in London, Manchester, Bristol, Birmingham, Leeds and East Anglia.

The bank, which has UK restaurant fast food chain LEON in its portfolio, has continued to lend throughout the pandemic cycle – just as it did following the Brexit referendum in 2016 – with over GBP45million in sponsor-backed deals approved since lockdown.

What’s your outlook for Q3 and Q4 in terms of deal flow?

We’ve done over 300 credit committees and approved over GBP1 billion in new loans since March, including around GBP385 million through CBILS and CLBILS. The volume overall is probably down, but perhaps our share of deals are increasing as we stay open and consistent as others don’t. In the last month alone, we’ve seen four times the lending volume going to the credit committee vs the same time last year.
 
How have you been affected by Covid-19, both in terms of internal operations and any restructuring needs businesses may have? What’s your outlook for the rest of the year?

New volume went a bit quiet in March, but being a relatively young tech-enabled bank allowed us to take that data and analyse it quickly. We managed to reappraise our whole portfolio over the course of a long weekend, and therefore really identified where the clients were in the areas that were affected by Covid. It all came down to cash. Forget about the covenants; let’s focus on which of the businesses are in need and getting that cash out to them. We mobilised quickly in-house and that says a lot about how the business reacted initially. We got through the backlog of customer needs by the end of April.
 
Did you encounter any challenges internally?

Working remotely was a challenge, as no one's been through that before. One of our USPs, and I think we’re the only bank who does this, for every transaction we have a face-to-face credit committee.
 
For sponsor deals, management teams come in together with the sponsor and get to meet all the decision makers. These credit committees are now being run virtually. As a fully cloud-hosted bank, the transition from in person meetings to online was an easy one for us. While everyone would prefer meeting face-to-face, there are ways of doing things more efficiently.
 
What have you learned during this time?

The quality of some of our management teams that we back stood out. For a lot of people in the last ten years or so, it’s been quite a growth time, but no one has faced these conditions before. LEON, for example, managed to pivot their business fantastically well. At the height of the pandemic, LEON turned a few of their locations into mini-supermarkets as well as provided meals to NHS staff, instead of letting food spoil.

How are you positioning yourselves in terms of a potential no-deal Brexit?

At the moment it’s a massive unknown in the way it’s going to go – we may be heading towards a no-deal. The challenge is that some businesses have supply chains where goods are coming from Europe, either materials or some of their assembly is done there. It’s more challenging for them, because they can’t accurately predict what will happen to the material costs, so although we look at them anyway in terms of raw material and currency fluctuations, they will be more under the microscope than ever. Despite what happens, we believe there will still be plenty of opportunities to continue supporting strong management teams and viable British businesses.