By now it’s no secret that the spread of COVID-19 will likely continue to significantly curtail travel.
As airlines suffer, so too will hotels. For lenders, cancellations and reduced bookings will mean reduced cash flow and the potential inability to service debt. It’s tempting to compare the imminent disruption to that of the ’08 recession, but the true analog may be the travel decline after 9/11. Then, as now, the impact is expected to be temporary – yet no one can predict for how long.
Given the uncertainty and dwindling cash flow, lenders in the sector must prepare for loan workouts and restructurings. Here are some of the considerations they will have.
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