Bloomberg News

European Junk Borrowers Face Cash Shortage, Moody’s Carayon Says

April 11, 2012

Junk-rated companies in Europe, the Middle East and Africa with about $180 billion of debt maturing in the next two years face a cash shortage as banks become increasingly reluctant to lend, according to Jean-Michel Carayon, senior vice president at Moody’s Investors Service.

Carayon spoke in an April 4 interview.

On bank lending:

“We see less willingness from banks to lend. They want to reduce their balance sheet and optimize use of capital so we anticipate there might be some risk of diminishing liquidity for the next quarters.”

“The refinancing of corporates is probably going to be increasingly complicated in Europe. Issuers with the highest leverage and relatively weak business models might struggle to refinance their debt maturities.”

On potential downgrades:

“We anticipate more downgrades than upgrades.” Some B- rated companies “might struggle to refinance because of their high indebtedness and the reduced appetite of banks to lend. Therefore we would consider lowering some ratings because of the increased probability of default.”

To contact the reporter on this story: Katie Linsell in London at klinsell@bloomberg.net

To contact the editor responsible for this story: Paul Armstrong at parmstrong10@bloomberg.net


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