Banks ‘open for business’
THE region’s corporate bankers say they are open for business – with or without the government’s £50bn bailout.
The Bank of England has sought to restore faith in the banking market by making billions available to ensure institutions continue to lend.
As well as earmarking cash to recapitalise the banks there will also be a £250bn government loan guarantee designed to stimulate lending.
But corporate financiers in the North West say credit has always been available for certain deals despite market turmoil.
A string of smaller deals have completed in recent weeks with Royal Bank of Scotland, the Co-operative Bank and Yorkshire Bank active in the market.
Advisers said banks have been prepared to put money into sub-£20m deals, but credit committees are cautious – and at times unpredictable. The cost of borrowing has also risen.
Craig Hopwood, associate director at regional private equity house Spirit Capital said the climate had changed in the last few months, but banks were still lending.
“They are being more careful. They’re offering less and being more thorough. But we’re still confident we can get the debt levels we need.”
He said Spirit typically used £3 of debt for every £1 of equity, lower than some private equity investors and more attractive to the banks.
Tony Dean, managing director of Corporate & Structured Finance at RBS in the North West, said: “The market conditions are undoubtedly difficult, however that’s not to say that deals cannot be done in the current climate.
“If a vendor has a good quality business to sell then funding is still available from banks and the North West’s private equity community.
“In the current climate the old maxim of the right deal at the right price is more relevant than ever.”
Mark Blower, director at Lloyds TSB Corporate Markets’ acquisition finance team in the North West, said: “Our deal range spans smaller private equity-backed deals through to major leveraged buyouts where we continue to take significant sole and joint underwriting positions.”
He added: “We adopt a prudent approach to risk and use our capital cautiously, focusing on conservatively structured and appropriate priced deals involving strong businesses.”
But David Smith, corporate finance partner at PKF in Manchester, said: “The banks are really cautious. They can’t take a deal that’s got flaws at the moment.”
