De-leveraging Remains Primary Corporate Theme: EY

Dougald Middleton, partner and head of Ernst & Young’s capital and debt advisory team, comments on today’s Bank of England Q3 Credit Conditions Survey

“The survey data confirm what we are hearing from our clients that de-leveraging remains the primary theme for corporates in managing capital. Businesses are keen to shift debt from their balance sheets so they are more financially nimble to navigate the choppy waters ahead. Corporate balance sheets are getting stronger, with lower debt and substantial cash reserves.  

"The survey reveals that banks are increasingly willing to lend, boosted by the unlimited liquidity being provided by the EIB.  This has resulted in some very competitive loan pricing for large corporates. Supply for sub-investment grade borrowers and small enterprises is much tougher to find and the pricing is much higher. The cost of debt for the companies which make up the core of the economy is undoubtedly impacting on the appetite to borrow.

“The survey also indicates a pickup in demand for debt to finance M&A activity. Our clients confirm this trend and we expect to see an increase in strategic acquisitions by public companies using their retained cash and bond or bank debt."