Takeaways for mid-2020 and beyond
Tom Molzahn, Prudential Capital • July 13, 2020
COVID triage and sizing up the future
I’ve heard that “Working from Home” has officially mutated in to “Living at Work,” and I certainly don’t disagree—it seems that whatever lines were blurred with the transition are assuredly gone.
While some companies have made the move back to the office, we at Prudential are staying at the home office for the time being. Part of the decision is based on the fact that our operations have been minimally disrupted. While we miss being on the road and seeing folks face-to-face, we’ve adjusted well and appreciate the flexibility for phone calls and video conferences from all our clients, prospects, and network contacts. All told, our production through the second quarter was slightly up YoY despite the circumstances, which demonstrates the resiliency of our portfolio and the capital markets.
The mid-point of the year is a great time to assess where we are for 2020 and beyond. Below are three key takeaways thus far:
1. Triage is Complete:
The first couple months after the outbreak of Covid-19 were centered on assessing where our clients and prospects stand. As we see it, most everyone falls into categories of Challenged, Surviving, and Thriving, with some businesses having a mix of all three depending on the diversity of their end markets. We have been working diligently with the Challenged credits to make sure they’re in the best position to get through these hard times. And for those who are Surviving or Thriving, we have provided support through guidance or new capital investment. Our goal, as always, is to be a valuable partner and co-pilot through all cycles.
2. Activity Is Improving:
Both from our perspective as investors and from our partners’ perspective as operators, we have seen activity start to pick up these past several weeks, with April and May seeming to be the trough. Some sectors are ramping up quicker than others with a “V” shaped recovery and others are experiencing more of a “Nike Swoosh” slower recovery. We have been fielding more in-bound requests for senior capital—to take advantage of highly attractive rates or to fund a capital project—and we have seen deal flow increase on the mezzanine side of our business as well. We know real challenges remain, but we take this as a positive sign.
3. Planning for the Future: With a solid understanding of the new normal and some positive indicators, we are now preparing for the rest of 2020. We are planning new methods of outreach including webinars, virtual industry round tables, and video conferences, all in an effort to maintain a high level of connection with our borrowers and prospects. Similarly, our partners have fully adjusted and are running business with a “new usual.” The bottom line is that despite all the challenges in 2020, businesses are adapting effectively and seeking to have a strong second half of the year.
(Tom Molzahn, CFA, is a director at Prudential Private Capital)
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