French corporations sick with debt | EUROtoday
The days of straightforward cash on the monetary markets are nicely over. Today, the credit score faucet can all of the sudden shut, because the Clariane group of retirement properties has had the bitter expertise. The former Korian thought it had discovered assets to repay its money owed falling due between December 2023 and December 2024. All it took was one piece of unhealthy information and the anticipated cash disappeared, forcing the corporate to urgently manage a plan rescue price of 1.5 billion euros with the help of its largest shareholder, Crédit Agricole, because it introduced on November 14.
It all occurred in a couple of weeks. “We thought we had done the hard part by signing an agreement in July with twenty-one banks to renew our credit lines. But this proved insufficientrelates Philippe Garin, the financial director. The public and private debt markets in which we used to finance ourselves all closed within a few months. And the banks cannot replace them, because they are constrained by the European Central Bank [BCE] to reduce their exposure to poorly or unrated issuers, like us. They accompany us, but they cannot do everything. »
Clariane nevertheless intended to find capital from financiers ready to invest in her real estate assets. An operation of this type was to be completed on October 31. Alas, on October 24, the Stock Exchange reacted very badly during the publication of the group’s quarterly results, with the latter recognizing that its debt reduction was taking longer than expected. “The Clariane share lost 40% in two sessions and investors preferred to put the real estate operation on hold”, continues Mr. Garin. And to conclude: “We have gone in the space of fifteen months from a world where we normally had access to all debt markets, without abusing them, to a situation where we had a liquidity risk in April 2024.” Dizzy.
Clariane’s difficulties illustrate the violent reversal that has occurred within the debt markets. For greater than ten years, companies have benefited from virtually free and plentiful credit score, linked to the ultra-accommodating financial coverage of central banks. Against a backdrop of zero and even unfavourable rates of interest, buyers agreed to take dangers to earn a little bit return by lending to debtors of decrease high quality than LVMH or Nestlé.
This world turned the wrong way up in 2022, when central banks sharply raised charges to fight the surge in inflation, following the breakdown of provide chains after Covid-19 after which the warfare in Ukraine. In November, the five-year US authorities bond yielded 4.5%. And that adjustments the whole lot.
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