Banking inertia threatens plague of zombies
Banks’ continuing reluctance to finance new deals or restructure existing loans threatens to create a swathe of “zombie credits” and is forcing private equity firms to take creative measures to finance deals.
A day after it emerged buyout firm Silverfleet Capital had approached more than 15 banks in a bid to secure financing for its €213m ($303m) buyout of sausage case manufacturer Kalle Nalo, statistics from ratings agency Fitch showed a worrying number of companies faced defaults on their loan obligations.
The data showed the percentage of European companies covered by Fitch facing defaults on their loan interest over the next 12 to 18 months has risen from 8% to 20% between December and July.
Seniors lenders’ reluctance to restructure bad loans and accept further writedowns on the value of their exposures to buyout deals could lead to another liquidity crunch, industry sources warned.
Financial News and sister publication Private Equity News will provide full in-depth analysis of the issue in Monday’s online and print editions.
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