AdSlot 1 (Leaderboard)

Credit to corporates to remain blocked until 2010

found that 39% of CFOs polled saw no recovery of credit conditions and pricing
until the first half of 2010. The research was conducted between 12-30 September
­ the period that kicked off extraordinary economic instability with the failure
of Lehman Brothers and nationalisation of Bradford & Bingley.
A further 34% wagered a recovery would come in the last half of 2009, roughly
one year after the US Treasury’s banking bailout plans first came to light.

Ninety-seven per cent of respondents said credit was costly, up 38% on the
same period last year, while 89% ­ a 41% increase year-on-year ­ said credit was
hard to obtain.

CFOs and FDs of non-financial companies moved fast to protect their companies
from economic fallout in the period the study was undertaken. Taking the hint
from the suffering of the banking sector, Deloitte found many had already
started to de-leverage and restructure their balance sheets, as news of
catastrophic failures and nationalisations both sides of the Atlantic gathered

“For the first time since the survey started, more CFOs plan to reduce
gearing over the next year than to raise it,” Deloitte vice-chairman Margaret
Ewing said. “A majority of CFOs rate bank borrowing as being unattractive ­ a
big change from last year when almost three-quarters of CFOs saw it as

The survey revealed a general deterioration in the optimism that had been so
resilient among FDs and CFOs in the last year, even as the chain of emergency
nationalisations on both sides of the Atlantic unfolded, compounded in the UK by
the near-collapse of the banking industry. Ewing said companies were now focused
on containing the fallout. “CFOs are preparing for a more prolonged period of
distress in credit markets than they had earlier expected, with cost-cutting and
cash preservation coming to the fore,” the vice chairman said. “There is also a
growing readiness to contemplate more radical options such as offshoring and
dividend cuts ­ a reflection of the growing intensity of the slowdown.”

Predictably, the study showed short-termism ruling future strategy amid
current uncertainty. More than half of CFOs asked by Deloitte said they would
cut headcount and capital expenditure, and 70% planned to further batten down
the hatches by putting on a hiring freeze. The number of CFOs considering moving
capacity offshore to save cash doubled in the quarter to 29% and the number that
had decided to cut dividends rose five-fold to 16%.

Related reading