Corporate Debt - A Lender's Perspective

In the paper today was a truly staggering figure - £110 billion of corporate debt that will need to be refinanced in 2009.  That is probably a conservative figure, focusing only on the larger companies.  It will be interesting to see how this plays out.

Contrary to what FDs are probably thinking, if I were still a banker, I'd be offering eye-watering rates, and be rubbing my hands at the opportunity to drive margins up significantly.  This is my thinking:

1)  the amount of finance available is likely to be in short supply, and when demand exceeds supply, prices inevitably rise

2)  whilst rates might have come down recently, over the term of the refinace period, rates will probably go up as economies try to cope with the rampant inflation that the current lax money supply policies of major economies will inflict over the medium term

3)  for many of these corporates, the risks involved in lending to them in the current climate have increased and therefore higher rates are justified

4)  if the corporate doesn't like the rates I'm offering, they could always try and go elsewhere.  If they can't, they'll have to pay my rates.  If they can, their defection elsewhere reduces my book, which is another objective I have at the present time.

I wonder how many bankers are thinking along these lines.  I think there is a strong likelihood that this scenario will play out in 2009 and, if so, how many of these deals will send companies to the wall?

This is just one of the crunch points in 2009 that will make it a difficult year.