Week Ending: A new reality

ONE is always wary of making general statements, but it is increasingly clear that the corporate world has changed forever in the last year.

The banks, which oil the wheels of the economy, say they are open for business – and some unquestionably are lending – but not in the same way, and at the same price than they were before.

In the last week the North West has seen two businesses, Lookers and Daisy Communications, turn to the public markets to raise money because bank funding was either too expensive or just not there.

Matthew Riley, the 35-year-old serial award winner, who founded Nelson-based Daisy – and who will make a cool £27m after the reverse takeover of listed Freedom4 Group – explained: “We’d done 23 acquisitions and we wanted to do more, but the banking and debt finance wasn’t there, so we had to look at other means.”

One element of the deal, revealed on Wednesday, was an £80m placing, which has given Daisy the firepower to do more deals.

Car dealer Lookers meanwhile, through its 5-for-6 placing and open offer to raise £60.6m and a firm placing to raise £20.2m, will renegotiate costly banking agreements and cut its borrowing costs by more than £16m over the next two years.

More such deals are expected in the coming weeks and months, as companies look for stable and sustainable capital structures for life in this much-changed world.

It’s no surprise that since the financial crisis, the banks are being more wary with their lending policies, and no sensible person would ever advocate a return to the days, where finance, particularly for property schemes – was there for anyone with a sophisticated sales patter and a bright idea.

As a nation, we are horribly over-borrowed, and that is going to be the outstanding challenge for the next Government, and I think the issue of debt – corporate and personal – will be the enduring theme of the new reality.