Credit still scarce, but equity issues remain popular

The latest quarterly roundup of CFO sentiment from Deloitte finds that CFOs have not seen benefits from the Treasury and the Bank of England’s quantitative easing efforts on the price or availability of credit. Only 10% of CFOs expect an improvement this year, 59% see credit conditions improving in 2010 and almost one-third do not see any improvement until 2011 or later. “Consequently, CFO sentiment about the financial prospects of their businesses remains depressed, but less so than in previous quarters,” says Deloitte partner and vice chairman, Margaret Ewing.

However, the latest survey shows equity issuance as a more popular route to finance than leverage options, such as bank borrowing or corporate bonds, for the first time since Q3 2007. “Most CFOs take the view that a period of rapid debt accumulation, coupled with a contraction in overall equity supply ­ so-called de-equitisation ­ is over,” says Ian Stewart, chief economist at Deloitte. “CFOs are looking to a profound shift in balance sheets away from debt and towards equity.”

These sentiments chime with recent equity issuance deal flow from the FTSE-100 and the FTSE-250, as companies including Lonmin, 3i, DSG, Travis Perkins and several more have conducted rights issues in recent months. In September 2008, just 4% of CFOs felt it was a good time to issue equity. This figure rose to 25% by March 2009.