Here’s a question for you: are you about to be impaled on the maturity spike?
The banking system is set for a rush of companies looking to renegotiate facilities, and those that leave it late may find themselves on the sharp end of some very difficult negotiations.
The banks face a huge increase in demand for refinancing in 2012 when £34bn of facilities will be up for renegotiation in what has been dubbed “the maturity spike”.
Following the credit crunch many facilities, from around 2009, were granted only on a three-year basis. This means that many deals will reach maturity at about the same time, 2012. In addition, many businesses have held back on capital investments during recession and have instead focused on reducing debt.
As the economy recovers they will have to start reinvesting and asking for more facilities, putting even more pressure on banks. And changes in banking regulations mean your local managers cannot be as open-handed with facilities as they were a few years ago.
But those who return to the banks will find the terms on which they took facilities out just a few years ago could well have changed dramatically.
This is not all. The basis on which lots of facilities were built has also changed: many term loans and overdrafts were secured against commercial property, but these values have declined over the past few years, as have the multiples on which banks are willing to advance cash on buildings. Don’t assume the old days of just turning up to your bank and being able to easily renegotiate your facility still hold. They are gone.
For companies that are canny enough to start moving now, and renegotiating terms before the spike and before those that choose to renegotiate at the last minute, the next few months may hold some opportunities. Most pundits argue that the time to pick up the phone to the bank, irrespective of when your facilities are due to mature, is when you have finished reading this article.
