A Daily news digest by Jasper van Santen

Companies must raise £28 trillion to finance ‘wall’ of debt – Telegraph

In Economy, Really?!? on May 11, 2012 at 06:34

Students display a banner outside the EU Commission headquarters ahead of an European Union summit in Brussels

Companies must raise £28 trillion to finance ‘wall’ of debt 

28.5  thousand billion. That’s a lot of zeros.  In fact 12 of them.  We’re fucked.

Businesses will need to secure as much as £28.5 trillion to refinance old borrowings and fund new spending, raising major questions over the ability of the world economy to avoid a recession, according to a report from Standard & Poor’s.

British companies will have to find between £220bn and £268bn of new financing to fund their growth plans on top of refinancing hundreds of billions of pounds more of existing debt, according to the ratings agency.

The scale of the refinancing required, as well as the amount of new debt companies must sell, could create what S&P described as a “perfect storm for credit markets”.

The report continued: “Governments and banking regulators are now not as well placed to counter another perfect storm scenario given that they have already expended so much of their fiscal and monetary arsenal to mitigate the problems arising in recent years.”

The consequences of this are already being felt in the rising cost of borrowing faced by everyone from the largest banks to homebuyers when taking on new debt or refinancing existing loans.

On Thursday night the CBI echoed the warning and said central banks and governments needed to beware the problems brewing in credit markets.

“These figures show why monetary policy around the world needs to support growth, and why banks need to be given enough time to recapitalise and to meet their future regulatory requirements,” said Matthew Fell, a director at the CBI.

 

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