Drawing Liquidity in a Market Drawdown

When equity markets fall sharply, the institutions that provide most conventional credit become simultaneously more cautious and more constrained. Banks face pressure on their own balance sheets as loan-book values deteriorate, regulatory capital buffers come under scrutiny, and risk appetite recedes across the organisation. Credit committees tighten eligibility criteria, widen spreads, reduce maximum advances, and lengthen approval timelines. For borrowers who are not existing clients with established facilities already in place, obtaining new credit in a sharp downturn can take weeks or months — far too slow to be useful if the need is immediate. The paradox is acute: the moment when liquidity is most needed is also the moment when it is hardest to obtain through conventional channels.

One of the clearest lessons from periods of acute market stress is the value of having financing in place before it is needed. A shareholder who completes a term facility against their listed shares during a period of relative market calm has secured liquidity for the facility’s duration — typically one to three years — regardless of what happens to markets during that time. If the share price falls, the borrower has already received the loan proceeds and can deploy them. If conditions deteriorate severely, the borrower with a non-recourse facility knows their maximum loss is the pledged collateral, and their other assets are protected. Planning ahead transforms a potentially chaotic reactive decision into a considered strategic one.

In periods of acute market stress, counterparty risk — the risk that the financing provider itself encounters difficulty — becomes a legitimate concern. Borrowers should consider not only the terms of the facility but also the stability and continuity of their lender. Black Haven Investments operates as a principal lender using its own balance sheet, without dependence on wholesale funding markets that can seize up in a crisis. Facilities are structured as bilateral agreements directly between Black Haven and the borrower, with clear, contractually defined terms that are not subject to unilateral revision based on market conditions during the term. That stability is a feature that borrowers should value at least as much as the headline LTV.