BIG FOUR POISED TO TAKE OVER COMMERCIAL LENDING – The major Australian banks will be forced to shoulder a greater share of commercial lending, as international banks retreat from the domestic financing market (Australia)

Posted by Gilmour Poincaree on December 10, 2008

December 11, 2008

by Scott Murdoch – The Australian


A report from Deutsche Bank has found that $84 billion worth of corporate debt is to be refinanced over the next two years, forcing company directors to examine their equity options.

The investment bank said in the first half of this year, the top four banks were responsible for half the new syndicated loan allocations.

The portion taken by the domestic banks was up from 34 per cent in 2007, after a marked contraction in activity by US and European banks.

So far this year, the European share has retreated from 34 per cent to 28 per cent, and US bank participation has more than halved from 14 per cent 6 per cent.

The report said since 2006, $280 billion worth of syndicated debt was raised in Australia, of which 60 per cent is held by offshore banks.

Deutsche Bank’s head of leveraged finance Marla Heller said the increase in corporate activity over the past two years had led to the significant amount of debt raisings.

“There has been growth from 2005 to 2007. A big driver of that is the private equity and the leveraged buyouts,” Ms Heller said.

“Also, from 2006 and 2007 there were a significant number of corporate refinancings.

“I think in the first half of 2008, we saw the retreat of foreign banks. The Australian banks will be more like the cornerstones.”

It has been estimated the most debt due to mature is held among real-estate investment trusts, utilities and infrastructure.

Deutsche predicts international banks will depart since the introduction of regulations requiring companies to have better financial coverage of their assets.

“It is hard to see the Australian banks having all of the capacity to fill the void,” Ms Heller said in reference to the retreat of foreign banks.

“We will see opportunities for other entrants coming in and that won’t be just the banks but private equity.

“I think corporates are going to have to look at how they support themselves from a capital point of view.”

Deutsche Bank’s managing director of global banking in Australia, David Backler, said there would be a growing role from private equity firms which, globally, are holding almost $1 trillion worth of cash.

He said: “There are going to be large effects with $84 billion worth of debt maturing. Where is that going to come from?

“We think that the Australian banks have a big job to do because of the foreign banks retreating.

“The offshore debt markets are challenged. That is going to lead people down the path of equity raisings and more private equity.”

Deutsche has forecast lending and refinancing deals will be structured differently in 2009, with fewer banks in large scale syndicates.




Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: