Refinancing wave set to hit
Sydney Morning Herald
Saturday February 5, 2011
COMPETITION for capital is likely to be more fierce this year, with more than a third of Australian companies needing to refinance their debts.The debt advisory leader for Ernst & Young, Paul Clark, expects the funding pool to tighten as borrowing begins to rebuild flood-ravaged communities and companies renew loans.Probably the hardest hit in the refinance wave will be small business, particularly in the retail, export and property-development sectors.Mr Clark said the financial crisis had changed the lending landscape, with short-term funding now the norm since the cost of longer-term borrowing skyrocketed."This is why we've seen larger corporates tapping into overseas bond markets and the United States private-placement market to access cheaper longer-term funding," Mr Clark said."However, this is really only an option for the big end of town and what we are now going to see is a relentless wave of demand for refinancing over the next few years."An Ernst & Young survey found 34 per cent of Australian companies would need to refinance this year, while 48 per cent would need to refinance within the next four years.Mr Clark said businesses would need to prove to lenders they had a sound business model."From now on, it means people expect companies to perform well and banks expect to be able to pick and choose among those really good businesses and those businesses that aren't as good," he said.
© 2011 Sydney Morning Herald