New Greenwich Associates survey out on how credit market problems are hitting companies of all sizes, both in terms of their ability to get capital and in their economic outlook:
- Forty-five percent of large U.S. companies say their access to commercial paper markets has decreased as a result of the current market turmoil.
- More than 70% of companies say pricing on commercial paper programs has increased, including 22% that report their pricing has increased “significantly.”
- Forty-three percent of companies with more than $5 billion in annual sales say their access to commercial paper has been reduced, and among companies with annual sales of $500-$999 million, that share jumps to approximately two thirds.
- Almost a quarter of U.S. companies say these historic shifts in credit conditions have increased their needs for credit to fund ongoing operations.
- Smaller companies are feeling the pinch the most. One third of companies with annual sales of $500-$999 million say market turbulence has increased their need for operational funding.
- Among the industries with the highest proportion of companies saying they’ve experienced an increased need for operational funding are consumer goods (36%), industrial/transportation (28%) and financial institutions (26%).
- Forty-two percent of large U.S. companies also say their ability to secure revolving credit facilities has decreased or significantly decreased as a result of the current crisis in global credit markets, and more than two thirds say pricing on these facilities has increased.
- Hardest hit have been companies with credit ratings of BB or below, more than half of which say their access to revolving credit facilities has been reduced.
- Sixty-two percent of companies say their ability to issue long-term bonds has been curtailed, including 64% of companies with more than $5 billion in annual sales.
- Seventy-seven percent of companies say pricing on long-term bond issues has increased, including 30% saying their costs of funding have increased “significantly.”
- It is interesting to note that companies with investment-grade ratings are more likely than their lower rated counterparts to say they’ve experienced an increase in pricing on their long-term bonds, at 83% to 66%.
And then on the economic outlook:
- Only 4% of companies think the economy will turn positive in the next six months; 47% expect the slowdown to last for 18 months or longer.
- Not a single company with annual sales of less than $1 billion thinks there’s any possibility of an economic rebound in the next six months.
- Mid-sized companies are especially gloomy in their outlook. Among companies with annual sales of $1-$5 billion, nearly 50% say the economy will not begin to recover for at least the next 18 months.
- Demand for the funding of capital expenditures is slowing. Sixteen percent of U.S. companies — including a quarter of consumer products companies and almost 25% of natural resource companies — say current market conditions have led to a decrease in their need for cap-ex financing.
Originally published on Oct 3, 2008 at Infectious Greed and reproduced here with the author’s permission.
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