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New Joint Venture Urges Welsh Business to be Proactive on Interest Rate Hedges
With figures suggesting thousands of SMEs could have been mis-sold an interest rate swap as part of their business loan, a new joint venture is urging Welsh businesses to be proactive and review their finance agreements.
The IFR Group in association with Cardiff and London law firm Capital Law, is offering an advisory service to companies who feel they may have been mis-sold an interest rate swap or “hedge” before the financial crisis without the risks involved being properly explained by the lender.
Marketed to protect against rising interest rates, some companies are now arguing that they were not made aware of the implications of the rate going down. With the interest rates slashed by the Bank of England since 2008, companies with a profitable underlying business may now be crippled by massive fees or faced with buying their way out of these ‘hedges’ at a considerable cancellation cost.
Steve Bloor, managing director of the Cardiff-based IFR Group- experts in financial disputes who have recovered over £10m for their clients since 2007- said: “This is a ticking time-bomb for Welsh businesses, many of whom could now find they are out of their comfort zone and lumbered with a costly financial product which was never properly assessed by the bank to be suitable for their business. Often such products were imposed as a condition of further funding so the customer was deprived of making an informed choice.
“We have come across a number of businesses that feel trapped, not only by the onerous terms of the agreement which continue to damage their business, but also ironically by a concern not to lose the continued support of their bank through a difficult time.
“This dilemma is not something which businesses should have to face alone. Working with Capital Law, we have the expertise to help them, but it is important they take action quickly to avoid any complaint being time barred.
"The issue is complex enough so we are operating a simple two-stage process: first, we carry out an initial no nonsense assessment of the viability of a claim. Capital Law then works with the business with the goal of exiting the hedge and recovering their losses - whether through negotiation or litigation.”
Andrew Brown, Partner at Capital Law said: “Many businesses turn to us when they need a problem to be solved. That is often when a dispute has arisen, but we also provide strategic advice on strengthening all aspects of their funding and trading agreements so that disputes can often be avoided. Advising on these hedge products is a logical extension of this.
“We work with our clients to achieve the most favourable outcome for them. Often that means a negotiated settlement and a continuation of the banking relationship - if that is what the client wants. But if court proceedings are required, we are best placed to run them.
“We always look at alternative methods of funding litigation, so as to ensure that any businesses suffering from these hedge products have a cost effective route to recovery. Our experience of working with a number of the leading third party litigation funders - who will fund the claim in return for a modest share of the winnings - also gives our clients even more options than ever before.”
For more information contact Daniel Tyte or Victoria Leyton on daniel.tyte@
Notes to editor
The IFR Group (The Independent Financial Resolutions Group Limited) was established in 2007, specialising in claims related to financial products and services.
Steve Bloor, Managing Director, has over 20 years experience within the financial services industry in legal and regulatory compliance roles, most recently with Barclays Bank. The company employs professionals from across the financial services industry who have expert knowledge of how financial products work together with the many laws and regulations that govern their structure, how they are marketed and how they are administered.
Capital Law LLP is a commercial law firm operating across seven main disciplines – employment, corporate and commercial, intellectual property, recovery and insolvency, property, commercial litigation and banking and finance. In addition to these core legal services, the firm offers workplace issue resolution via its accredited mediator and a wide range of innovative training programmes.
In September 2008, Capital Law expanded its business by buying a consultancy and training business, now called Consult Capital Ltd, through which they offer consultants specialising in human resources, occupational health, health & safety, environment, wellbeing at work, first aid, fire safety, business process improvement, organisational development and management/ leadership training.
Follow Capital Law on Twitter @capitallawllp and Consult Capital @ConsultCapital