By way of an update, for travel sector businesses in South East Asia (and elsewhere), business is in absolute free fall.

There is currently a patchwork of amended visa, quarantine and exclusion measures in place across most countries. Airlines are shutting down most if not all international operations, at least through May 2020. Many countries are moving towards total closure of their borders. Some that remain open are requiring travellers obtain home country medical certificates confirming COVID-19-free status. Many home countries are only testing those who show COVID-19 symptoms, ensuring the certificates are impossible to obtain. Tourists are staying away and most people are just trying to get home while they can to ride out the COVID-19 pandemic.

It goes without saying that a cash flow waterfall is not much use when there is no cash flow at all.

This health and economic disaster has occurred during the tourism high season for a number of South East Asia countries, effectively robbing businesses of the vital cash flow needed not only to fulfil high season commitments but also to cover commitments over low season when historically cash is tight.

Many companies are or will be facing insolvency situations. For many foreign-owned travel sector businesses in Asia, there is unlikely to be any local government assistance available. Businesses will need to rely on their shareholders' (hopefully) deep pockets or bank funding to keep them going. If it hasn't occurred already, travel sector businesses will be asking staff to take unpaid leave or laying off staff and generally putting the business into caretaker mode until circumstances change.

But circumstances will eventually change. And businesses need to be ready. As we are apparently seeing in parts of China, businesses are reopening and the number of new COVID19 cases are falling. Businesses need to negotiate standstill arrangements with creditors and keep their material creditors up to date on what is occurring. Cash flow waterfalls should be used within the evolving confines of cash flow. Maintaining the confidence of creditors wherever possible at this crucial moment is key. The emphasis should be on the value of long-term relationships which will continue when business interruption due to COVID19 eventually passes.

The biggest question at the moment is just when will that happen?

PELEN

March 2020

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