The Next Refinance Problem

Corporate debt says the Times of London.

There’s been a dramatic rise in bad debts. Banks are not eager to lend.

Businessmen are scared about refinancing debt when it comes due.

Most of the chief executives I meet these days divide into two groups. There are those who expect trading to fall off a cliff. Then there are those who expect trading to fall off a cliff and also have debt coming up for refinancing.

Difficult trading they can cope with. But the prospect of trying to refinance borrowings in markets that are still frozen is really scary. It is the fear that credit will not be available even for the most solid companies at anything less than penal rates that makes this downturn so unnerving.

As John Cridland, of the CBI, told MPs yesterday, companies will be unable to borrow their way through the downturn as in other slowdowns over the past decade. This will force them to cut back on investment and other costs, including jobs.

It is only to be expected that small companies are finding it more difficult to squeeze money out of their banks than they were a couple of years ago. The banks that have signed up to the Government’s recapitalisation plan have committed to return availability of lending to 2007 levels consistent with commercially responsible lending practice. In the context of a sharp recession, commercially responsible lending practice means less lending.

About Luke Ford

Raised a Seventh-Day Adventist at Avondale College in Australia, Luke Ford moved to California in 1977. He graduated from Placer High School in 1984, reported the news at KAHI/KHYL radio for three years, attended Sierra College and UCLA, was largely bedridden by Chronic Fatigue Syndrome for six years, and converted to Judaism in 1993. From 1997-2007, Luke made his living from blogging. Living by Beverly Hills (Alexander90210.com), he now teaches the Alexander Technique (moving the way the body likes to move). Lessons cost $100 each and last about 45 minutes. In 2011, Luke completed a three-year teaching course at the Alexander Training Institute of Los Angeles. His personal Alexander Technique website is Alexander90210.com. Luke is the author of five books, including: » The Producers: Profiles in Frustration » Yesterday’s News Tomorrow: Inside American Jewish Journalism
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