Blog: Dean BestMy debt is my bond

Dean Best | 16 December 2008

The credit crunch has started to play second fiddle to the frontline battle against falling consumer sales and rising unemployment on the world’s financial pages of late, as the economic gloom spreads from the finance sector to broader consumer industries.

But, startling figures I saw today on the BBC website suggest that the ability of (or should I say failure of) businesses to be able to negotiate funding from their banks will bring the credit crisis storming to the front of the agenda once more.

The figures, reported by Robert Peston, the BBC’s business editor, are from the Bank of England’s quarterly bulletin and show that, in 2009, there will be a massive bulge in the value of bonds issued by European companies that have to be repaid.

Peston says that close to US$1000bn of what he terms "old world" companies' borrowings in the form of tradable debt has to be paid back during the next 12 months - with something like $800bn of this owed by financial companies and $200bn by non-financial companies.

“That would be a colossal sum to pay off at the best of times, and is equal to about five times what's been repaid in 2008. It is a disturbingly huge amount, at a time when even the bluest-of-blue-chip companies are finding it difficult and expensive to raise money by selling new corporate bonds,” he says.

There is of course plenty of talk about government bail-outs already for car and steel manufactures, but the prospect of these safety nets being extended to other more unexpected industries is rising.


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