Pictured: Chris Smith
Half of financial directors believe that the European sovereign
debt crisis will have a serious impact on the availability of debt
over the next twelve months, according to a survey carried out by
independent corporate finance house Clearwater.
Twenty leading financial directors from the West Midlands
gathered at Clearwater's offices in Birmingham to discuss access to
finance and the impact of the economy on funding. The group also
identified economic uncertainty and regulatory pressure on the
banking sector as having a significant impact on the availability
of debt.
The group also voted 3:1 that bank debt will become more
expensive for corporates in the second half of 2011, as a result of
the ongoing problems in the world economy and banking sector.
Chris Smith, partner and head of debt advisory at Clearwater,
said: "Generally, it has become slightly easier for corporates to
raise debt. We recently completed a large fundraising for a
start-up house builder - something that would have been unheard of
last year. However, on the whole, access to debt is still
restricted. With banks preferring scale and quality it is probably
easier to raise £300m than £30m and we suspect that the
ongoing sovereign debt issues in Europe will affect future
appetite.
"Having said that, the banks are willing to preserve their
relationships with good customers although there are some
concentration issues with larger clients. Some are unwilling to
have a large amount of debt from one client sitting on their
balance sheets, and are beginning to ask companies to club debt and
form relationships with new lenders, which can be new territory for
some companies.
"We have seen some of the foreign banks returning to the market
in the form of larger syndicated deals, but there is still a
reliance on UK lenders at the lower end of the mid-market and
below. Funding for SMEs is still not adequate enough and we have
all seen how the banks have missed their targets on Project Merlin.
In the current market lending decisions are taking a while to come
through and are not always commercially explainable, which can make
the process opaque and confusing. As a result, businesses need to
start looking at refinancing their facilities before the rush in
2012/2013 in order to have the best chance of success.
"As an alternative, asset based lending is becoming increasingly
popular among even the largest corporates. The industry has matured
in recent years and is now looking at larger size deals and, given
its flexibility as a source of capital, it should be seriously
considered."