INDEBTED companies face a scramble for capital as they try to refinance $11.5 trillion (£7.15 trillion) of loans globally in the next five years, a report showed today.
But the supply of capital is likely to be limited, as banks hold nearly $6 trillion of maturing debt and will be negotiating their own refinancing efforts alongside raising extra regulatory capital, Deloitte’s “A tale of two capital markets” study found.
UK banks alone hold £500bn of wholesale term debt due for renewal by the end of 2012 and need to raise their core Tier 1 capital ratios to seven per cent by 2013 to comply with the Basel III ruling.
The collapse of markets for debt instruments such as collateralised debt obligations has also hampered banks’ efforts to lend.
“Increased regulatory pressures will constrain banks’ abilities to fund their lending activities as cheaply as before, and will require greater capital to be held against liabilities,” said Deloitte partner and head of debt advisory, James Douglas.
Almost two-thirds of the debt owed by global banks is due by 2015.
A spike in highly-leveraged buyout and takeover deals in 2006 and 2007 immediately before the financial crisis has left many companies burdened with high levels of bank debt on five-year maturity cycles.