Geopolitical tensions and disruption: key areas for consideration for borrowers and capital markets issuers in the Gulf region – proactiveness in financial management and where to seek support

In our recent market update, we examined how geopolitical tensions and incidents of disruption  have introduced significant uncertainty into regional capital markets and we considered a range of key areas for companies to focus on from capital markets perspective, including disclosure obligations and events of default. 

In this newest update, we turn to considering in more detail the proactive steps both borrowers and capital market issuers may wish to consider taking in the wake of the potential market disruptions.

1. Proactive Covenant Monitoring

Against the backdrop of geopolitical disruption creating market and business uncertainty, borrowers and capital market issuers should proactively monitor covenant compliance across all of their financing arrangements, including:

• Bond and sukuk issuance documentation.

  It is important to understand that capital markets covenants apply only in respect of the relevant issued securities that are contractually governed by such terms and conditions – while an issuance programme may have certain covenants hardwired into the pro forma terms and conditions, those are in force only in respect of any series of outstanding securities that is contractually governed by such terms and conditions.

  With that in mind, to the extent an issuer has multiple series or securities issued at different times, each series of securities needs to be reviewed  specifically  for the details of their actual  terms and conditions. In addition, there may be instances where additional covenants have  been negotiated and included for a specific  issuance, and may be documented outside the usual terms and conditions of the main programme. On the flip side, to the extent a capital markets issuer has no securities in issue under the programme, the relevant covenants may not apply.

  While market standard senior unsecured investment grade capital markets products are relatively covenant-light, the position may not be the same for high yield or emerging markets issuers, where additional covenants may be much more extensive and far-reaching - closer to the typical covenants of standard bank loan documentation.

  Thorough legal review of all relevant documentation by experienced  legal counsel may be required to promptly map the relevance and applicability of covenants to different series, which will assist in prudent financial planning and liability management, if needed.

• Loan documentation.

  The application of financial covenants in loan documentation can be viewed as more straightforward; if covenant language appears in a facility agreement it is highly likely that its terms will apply at all times that any amount is outstanding under the financing.

  As obligors consider their financing options, the nature of their existing loan financial covenants will be a key factor. Loan financial covenants broadly fall  into “incurrence” style – which are tested only at the point that new indebtedness is incurred, or “maintenance” style - requiring periodic testing against the performance of the business whether or not any change has been made to the capital structure during the testing period. The latter are typically considered more exacting from a borrower perspective.

  LMA format documentation historically developed with maintenance covenants as the norm, but stronger regional borrowers have been able to negotiate  away from that position to incurrence and even “cov lite” positions as market competition among creditors has increased.

  In light of current market shifts, borrowers should seek input from legal and financial advisers as to how financing strategy could be impacted by offering a revised set of covenants. Given the increasing diversity of loan creditors in the market, a well designed covenant package can potentially open access to pools of specialist capital not previously available to a given obligor group. In contrast if market uncertainty extends beyond a month to many months, the narrowing of potential loan creditors in the market may merit a different tactic in a borrower’s approach to offering up certain expected covenants.

• Management of information, disclosure and market communications.

  Contractual terms of certain industry-specific or commercial contracts may impose information covenants vis-à-vis counterparties.

  Similarly, loan financings or related security documents will require borrowers to keep the creditors informed of events giving rise to potential or actual breaches of the terms of the financing. Failure to comply with such undertakings will itself be a default likely requiring discussion with creditors as to the need for remediation.

  On the capital markets side, public companies and capital market issuers with listed bonds or sukuk will be subject to certain continuing disclosure obligations which may require proactive disclosure of material events or material information that is otherwise not currently public information.  This may be in addition to the usual periodic disclosure requirements connected to a specific bond or sukuk issuance, financial reporting period, or a programmatic issuance structure, as a number of ongoing equity and debt listing and transparency regimes mandate disclosure of material non-public information without undue delay.

  Company management and investor relations teams should be proactive in seeking legal advice with respect to contractual information covenants or regulatory  disclosure requirements, and if in doubt should seek legal advice to navigate the relevant contractual provisions, market regulations and listing requirements.

• Force majeure.

  Under English law, whether or not force majeure can be relied on is a contractual question, as English law does not imply force majeure protection into contracts. Facility agreement style finance documents very rarely contain force majeure provisions.

  That being said, the inclusion of force majeure provisions is more common in commercial contracts, and the borrower may have entered into certain commercial contracts under which  force majeure protection may be triggered.

  Whether this will impact the financing documentation or the creditors’ position will likely depend on the materiality of those contracts and the impact of their interruption on the borrower’s business as a whole. Certain contracts crucial to the financial performance or business continuity of the borrower, or forming part of the security package, may be subject to specific protections in finance documents.

  As such, it is possible that a force majeure event under a commercial contract could give rise to either a misrepresentation, a breach of an undertaking and/or an immediate event of default, and therefore an early understanding of the specifics of the borrower’s key contracts would be key.

  Similarly, in both the loan markets and capital markets context, we often see the inclusion of specific events of default relating to either ceasing of business (whereby the issuer or obligor would be in default if it or any of its material subsidiaries cease or threaten to cease to carry on all or substantially all of its business) or seizure, expropriation or nationalisation of material assets (whereby there would be a default if the revenues or assets of the issuer or obligor or of any of its material subsidiaries are subject to such process), all of which may be related to either termination of key commercial contacts or otherwise in ability to continue business in circumstances of geopolitical tensions or conflict.

2. Stress-testing Covenant Compliance

Beyond monitoring current compliance, at the time of a potential market disruption, company management should consider proactively stress-testing their financial metrics and contractual covenants against a range of downside scenarios that could arise from geopolitical tensions or conflict. Such scenarios might include loss of customers or key sales, supply or energy contracts, delays in procurement and project execution, decrease in sales or debt recovery, disruption to supply chains, limited access to raw materials or resources, increased costs and resulting decline in profitability, operational disruptions (including damages to key business facilities and potential adverse impact on the companies’ business), or similar.

Key questions in stress-testing different scenario projections are whether the issuer or borrower will remain compliant with financial covenants despite the potential disruptions, and how much headroom there is on the covenant side before there is a risk of a breach. If covenant headroom is forecast to fall below acceptable levels, companies will know in advance what are the current pressure points and areas of focus for potential improvement (for example through mitigating actions to improve financial performance) or mitigation (for example through proactive liability management, including approaching the lenders and investors). If deficiencies are revealed in stress-testing, companies could be looking at temporary measures (such as securing a covenant holiday or a one-off or periodic waiver) or more permanent measures (such as amendment of the existing documentation).

The purpose of this stress-testing exercise is to ensure sufficient buffers exist within the covenant package to accommodate plausible deterioration scenarios, and to allow management to take pre-emptive action — before any technical breach arises — that might otherwise give rise to early acceleration, default or cross-default across the capital structure.

The best place to start is to engage legal counsel on the review of the existing provisions, and to work closely with counsel on understanding the calculation methods in the documentation, including any items that may constitute exceptional circumstances, exemptions, or add-backs. If any deficiencies are revealed, company management should discuss with legal counsel potential mitigants and proactive action – including engaging with lenders for a potential amendment discussions and approaching trustees and agents.

3. Monitoring Upcoming Debt Maturities and Refinancing Planning

Issuers and borrowers should carefully assess their debt maturity profile over the coming months, particularly where they are reliant on refinancing existing bank borrowings or outstanding securities in the capital markets for funding. Volatility in the capital markets will most likely lead to a number of planned issuances being delayed or postponed indefinitely, and it is important to have a good understanding of the refinancing requirements to plan well in advance.
Companies should therefore map all upcoming bond, sukuk and loan maturities across their funding structure — including scheduled amortisation payments, bullet maturities and any revolving credit facility clean-down requirements. This will allow an assessment of the realistic availability of refinancing options in a disrupted market environment.

Where maturities are approaching within the next 12 to 18 months, early engagement with legal and financial advisers, including relationship lenders, is strongly recommended. Planning refinancing well in advance provides the issuer with greater optionality, a stronger negotiating position, and reduces the risk of being forced into the market under adverse conditions.

Where a facility agent, fiscal agent or bond trustee (or, for a sukuk issuance, a delegate) is appointed under the financing  documentation, promptly engaging with such party  is also strongly recommended. The terms and conditions of the securities generally give the trustee/delegate some discretionary powers that may facilitate the implementation of the legal options pursued by the company (e.g., financing, refinancing, waivers) without need of directly involving the investors. Such discretionary powers, however, are typically limited to waivers or amendments granted on a ‘non materially prejudicial’ basis and obtaining the consent of the investors may be required if such legal options are not considered ‘non materially prejudicial’. Here, input of experienced legal counsel on the relevant waiver, amendment and investors’ meeting provisions will be essential to understanding the options available. Further, in circumstances in which a meeting of the holders of securities may to be required, the assistance of the trustee/delegate will be important for timely organisation and management of the relevant processes.

4. When and Where to Seek Support

Companies and their management do not need to navigate these challenges alone. A range of experienced advisers can provide critical support at every stage of this process.

Legal counsel specialising in Corporate Finance (including loan credit and capital markets) should undertake a comprehensive review of all existing bond, sukuk and loan documentation, providing management with a clear understanding of the full covenant package at every level of the funding structure. That includes reviewing, and advising on, financial covenants, information undertakings, events of default, and any applicable grace periods, cure rights and materiality thresholds.

Legal counsel would also advise on the interpretation and enforceability of specific provisions in the context of the current geopolitical environment, flag potential issues before they crystallise, and assist companies in managing their disclosure obligations and preparing for engagement with investors and lenders. Examples of these include advice as to whether a given circumstance could be considered “material” for the purpose of triggering a given financing term or as to the quorum of creditors required to take action in light of the occurrence of a breach – as well as to strategy to be deployed in anticipation of potential creditor action.

Legal counsel can equally advise on the full spectrum of financings, refinancing strategies or liability management options available to companies (including senior bond or sukuk issuances, hybrid capital instruments and loans).

Where a trustee or delegate is appointed for the issuance programme, it is equally important for the company that an experienced legal counsel advises the trustee or delegate in relation to various options (financing, refinancing or liability management) pursued by the company.

Financial advisers can play an essential role assisting management with financial planning and modelling, covenant testing and stress-testing, and working with the company’s legal counsel on developing liability management strategies. Financial advisers can also help initiate and facilitate dialogue with lenders and investors to manage anticipated or actual instances of covenant non-compliance or other breaches, acting as an intermediary to frame discussions with existing creditors proactively and constructively, assist in negotiations or help revise the debt capital structure altogether (including through standstill arrangements, covenant resets, and broader debt restack or reorganisation). In a more stressed scenario, financial advisers are able to work with legal counsel on advising on the best pathways to resolutions, including the crucial preparatory work when examining any available restructuring tools under the relevant laws, such as creditor mapping, intercreditor analysis, assessment of cross-default and acceleration risks, and engagement with key stakeholders.

In a disrupted market it is essential to be proactive: to take steps early to understand one's financial position, assess the risks, and make the right decisions with the benefit of expert guidance.

White & Case LLP has the experience, the expertise and the global reach to assist on any of the issues identified in this briefing – and where specialist input is required beyond legal advice, we are well placed to connect our clients with the appropriate advisers.

_{White & Case means the international legal practice comprising White & Case LLP, a New York State registered limited liability partnership, White & Case LLP, a limited liability partnership incorporated under English law and all other affiliated partnerships, companies and entities.}

_{This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.}

_{© 2026 White & Case LLP}