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Market News Publishing
June 17, 2010 Thursday 6:46 PM PST
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HEADLINE: S&P: U.S. Financial Institutions, For Now, Seem Poised To Manage Upcoming Corporate Loan Maturities
STANDARD AND POOR’S FINANCIAL SERVICES LLC (“S&PZZ-L”) – S&P: U.S. Financial Institutions, For Now, Seem Poised – To Manage Upcoming Corporate Loan MaturitiesNEW YORK June 17, 2010–U.S. financial institutions’ exposure to refinancing risk from broadly syndicated leveraged loans has significantly declined over the past two years, making it unlikely that these institutions would suffer serious losses in the event that corporate issuers can’t refinance maturing loans, says Standard &Poor’s Ratings Services in a report For Now, U.S. Financial Institutions Seem Poised To Manage Upcoming Corporate Loan Maturities, published June 17, 2010, on RatingsDirect. However, another severe disruption in the capital markets–which we view as unlikely at this point–could endanger commercial and industrial (C&I) lending, as well as further constrain consumer spending and make refinancing that much harder. But for now, we believe that U.S. financial institutions holding maturing leveraged loans that could encounter refinancing difficulties have a variety of risk management alternatives available, including sales of these assets to interested investors or the possibility of agreeing to modified loan terms (“amend and extend”) as an alternative to default. “U.S. banks have already implemented aggressive measures to shed this loan risk and will, we believe, continue to do so when and where warranted. Since 2007, when the credit crisis began to develop, banks increasingly applied strategies targeted to freeze and/or pare back unwanted credit exposures,” said Standard &Poor’s credit analyst David Tesher.“We believe that market participants will generally figure out how to refinance maturing leveraged loans, if it’s at all a viable option (although some creditors may prefer that financially weak borrowers file bankruptcy before engaging in any form of restructuring). Overall, however, the worst-case scenarios are unlikely, in our view,” Mr. Tesher added. “As long as there is sufficient funding capacity globally to absorb maturing corporate leveraged loans, it appears that U.S. banks are unlikely to incur material credit related provisioning and/or write-downs, and can avoid a situation that would lead to a widespread curtailment of C&I lending.”In Standard &Poor’s view, the funding alternatives that continue to emerge and evolve appear sufficient to absorb a significant amount of debt that will need refinancing in coming years. Of course, there are no guarantees that the system will not see a major shock anytime soon. But in the absence of such an event, we believe that U.S. financial institutions can come through the refinancing wall of the next few years with minimal losses.The report is available to RatingsDirect on the Global Credit Portal subscribers at www.globalcreditportal.com and RatingsDirect subscribers at www.ratingsdirect.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 or sending an e-mail to email@example.com Ratings information can also be found on Standard &Poor’s public Web site by using the Ratings search box located in the left column at www.standardandpoors.com. Members of the media may request a copy of this report by contacting the media representative provided.Media Contact:Jeff Sexton, New York, (1) 212-438-3448 firstname.lastname@example.org Analyst Contacts:David Tesher, New York (1) 212-438-2618Rodrigo Quintanilla, New York (1) 212-438-3090Key Contacts:Americas Media Relations: (1) 212-438-6667media_ email@example.com Americas Customer Service: (1) 212-438-7280 firstname.lastname@example.org Standard &Poor’s, a subsidiary of The McGraw-Hill Companies (NYSE:MHP), is the world’s foremost provider of independent credit ratings, indices, risk evaluation, investment research and data. With offices in 23 countries and markets, Standard &Poor’s is an essential part of the world’s financial infrastructure and has played a leading role for nearly 150 years in providing investors with the independent benchmarks they need to feel more confident about their investment and financial decisions. For more information, visit www.standardandpoors.com._________________________________________________________________________________________________________________________________________________(c)2010 Market News Publishing Inc. All rights reserved. Toronto:(416)366-8881 Vancouver:(604)689-1101 Fax:(604)689-1106
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