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CFO: Credit Line Issuance Heads for 2012 Drop

November 29, 2012, 08:18 AM
Filed Under: Industry News

Citing data from Thomson Reuters LPC, CFO magazine reports revolving lines of credit are on a pace to drop in 2012, as macroeconomic and regulatory concerns have dampened the market for new issuance and companies have found other sources of funding. As of November 14, the dollar volume of corporate credit lines issued in the loan market stood at $787 billion, while total issuance for 2011 was $1.28 trillion.

“The conventional wisdom is that everyone was waiting to see what happened with the [presidential] election,” says Richard Pollak, practice group leader in lending and structured finance at Troutman Sanders LLP. With the election over, volume has picked up some, he says, but now the conventional thinking is that the fiscal cliff could be keeping down activity.

But companies are also finding other sources of funding.

The corporate bond market is still booming. Global corporate bond issues hit $242 billion in October, bringing the year’s 10-month total to $2.5 trillion. That means global bond sales surpassed 2011’s total of $2.4 trillion with two months to go.

Many companies are using at least some of the proceeds from public bond offerings to repay all or a portion of the debt outstanding under their existing credit facilities. The proceeds of long-term bonds can also be used to replace short-term commercial paper issuance, dampening the need for revolvers.

Read the entire CFO article.

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