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For the retail and consumer product sector, the high yield market will likely remain an attractive source of capital.  

By Roberto L. Reyes Gaskin and Laurie Tomassian

The retail and consumer products sector has been deeply impacted by the COVID-19 pandemic, both due to physical constraints on brick-and-mortar stores and supply chains, and acceleration of existing trends favoring online purchasing and e-commerce. COVID-19 has reinforced the need to adapt to  existing disruptions relating to how AI and data analytics can be deployed in the sector, advances in logistics, and the shift toward more engaged and responsible consumption.

While the long-terms effects of COVID-19 against the backdrop of an already shifting sector are still uncertain, it is clear that many retailers are under pressure: some have commenced restructuring, while others are facing a tougher liquidity environment. All retailers will likely need to further accelerate their omni-channel activity and adapt business models to new retail conditions. Economic conditions may also encourage consolidation (either in the context of restructuring or otherwise) or take-private activity. A high yield issuance may be an option to raise funds to support acquisitions, capital projects, or refinancing of indebtedness.

The CMA is concerned that businesses may be engaging in unfair practices in relation to cancellations and refunds, and unjustifiable price increases.

 By John D. Colahan and Anuj Ghai

Background

On 24 April 2020, the Competition and Markets Authority (CMA) published an update on the work of its COVID-19 Taskforce (the Taskforce) (the Update Report). Shortly after establishing the Taskforce, the CMA launched an online service to allow businesses and consumers to report “unfair practices” related to COVID-19. The  Update Report summarises the nature and volume of complaints that the CMA has received so far and the actions it has taken in response. The CMA intends to publish additional reports while unfair practices related to COVID-19 persist.

The rules will echo ESMA’s temporary measures, however the FCA will extend the CFD restriction to capture closely substitutable products (such as turbo certificates). 

By Rob Moulton, David Berman, Charlotte Collins, and Gabriel Lakeman

The FCA has launched two consultations on:

  • Banning the sale, marketing, and distribution of binary options to retail consumers (CP18/37)
  • Restricting the sale, marketing, and distribution of contracts for difference (CFDs) and similar products to retail customers (CP18/38 and Annex)

These measures are largely the same as ESMA’s temporary product intervention measures in relation to CFDs and binary options, which were first announced in March 2018 (see Latham’s related blog post for more detail). The ESMA measures, which apply for a maximum of three months at a time, but can be extended by ESMA, have already been renewed twice. At the time ESMA’s measures were first announced, the FCA stated that it expected to consult on whether to apply them in the UK on a permanent basis.

Given that the ESMA measures will fall away due to Brexit (although the timing will depend on whether or not a transitional period is agreed), it makes sense for the FCA to act now to ensure that the measures will continue to apply if the UK leaves the EU without a deal.