NEW YORK (Jan. 25, 2010) – AlixPartners LLP, the global business-advisory firm, today said a $513 billion corporate-refinancing crisis could be fast approaching companies based in the U.S., as that is the amount of publicly traded debt of major U.S. companies that matures by year end.
“U.S. corporate borrowers could be facing a refinancing crisis in excess of half a trillion dollars in 2010, and that’s in just publicly traded debt” said Peter Fitzsimmons, AlixPartners’ president of North America. “Despite significant spread-tightening in the credit markets, there remain only limited options for rolling over this debt. Therefore, the potential for a very serious cash crunch could be knocking on the door of Corporate America.”
The AlixPartners study looked at debt presently held by about 1,200 U.S. corporations. A companion study of almost 600 major companies in the European G4—France, Germany, Italy and the UK—found an additional $569 billion (€397 billion) in debt that will be up for refinancing there this year.
“Despite recent market improvements, U.S banks still don’t have the financial flexibility they once did, and thus, could be forced to accept waivers and standstill agreements in order to avoid pushing borrowers into bankruptcy,” Fitzsimmons continued. “Consequently, we should anticipate that many of these corporations may begin issuing bonds as an alternative to loans.”
Companies do have other avenues to liquidity, though, said Fitzsimmons. “Many of these companies could unlock great amounts of cash though ‘self-help’ programs, such as unlocking dollars tied up in inventories, payables, receivables, overhead, trade spend and so forth. Companies are often very surprised to learn how quickly this ‘hidden money’ can be found and utilized to help them meet their debt-refinancing needs. Clearly, aggressive self help is going to be the name of the game for companies this year—or at least it should be.”
NOTE TO EDITORS: AlixPartners’ President-North America Peter Fitzsimmons, as well as other senior AlixPartners executives, is available for interviews on these topics.
About AlixPartners
AlixPartners LLP is a global business-advisory firm offering comprehensive services to improve corporate performance, execute corporate turnarounds, and provide litigation consulting and forensic accounting services. The firm’s specialty is urgent, high-impact situations when results really matter. The firm has more than 900 professionals in 14 offices across North America, Europe and Asia, and is on the Web at www.alixpartners.com.