Refinancing rush expected
(23 January 2012 – Australia)The big banks say with loans worth US$152.5 billion (A$146.7 billion) falling by 2014, companies will accelerate early refinancing after Europe's debt crisis spurred increases in borrowings and margins last quarter.
About 62 percent of the loans borrowed by companies last quarter were used to refinance debt, up from 44 percent in the previous three months, data showed. Faced with US$49.6 billion of debt falling due this year and another US$102.8 billion by the end of 2014, companies including Ramsay Health Care and Harvey Norman have approached banks for funds ahead of time.
''It's looking like the cost of investment-grade loans will rise by at least 30 basis points in the first quarter,'' said NAB's director of debt markets origination, Christine Yates.
The average cost of syndicated loans was 191 basis points, or 1.91 percentage points, more than benchmark rates last quarter, compared with a 177 basis-point margin in the US, Bloomberg data showed. ANZ Bank, the top arranger since 2009, and Royal Bank of Scotland also said costs would rise.
Funding costs for banks climbed worldwide over the past six months on concern Greece may suffer a default, setting off a credit freeze similar to the one sparked by the 2008 collapse of Lehman Brothers. Commonwealth Bank paid a record spread of 175 basis points more than swap rates when it sold A$3.5 billion of covered notes last week.
''It's looking like the cost of investment-grade loans will rise by at least 30 basis points in the first quarter,'' said NAB's director of debt markets origination, Christine Yates.
The average cost of syndicated loans was 191 basis points, or 1.91 percentage points, more than benchmark rates last quarter, compared with a 177 basis-point margin in the US, Bloomberg data showed. ANZ Bank, the top arranger since 2009, and Royal Bank of Scotland also said costs would rise.
Funding costs for banks climbed worldwide over the past six months on concern Greece may suffer a default, setting off a credit freeze similar to the one sparked by the 2008 collapse of Lehman Brothers. Commonwealth Bank paid a record spread of 175 basis points more than swap rates when it sold A$3.5 billion of covered notes last week.
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