US credit crisis to persist – Young & Partners

27 February 2008 17:15  [Source: ICIS news]

NEW YORK (ICIS news)--There are no signs of recovery thus far in the high-yield debt market, and it is still uncertain how long the credit crisis will continue to impact debt financings in the global chemical industry, said one investment banker on Wednesday.

“Debt financings will continue to be driven by M&A-related borrowings and some refinancings,” said Peter Young, president of New York-based investment bank Young & Partners. “What is less known is whether the crisis in the debt markets that started in July 2007 will continue longer term.”

In 2007, high yield debt issuance fell to $6.2bn from $13.3bn in 2006, according to Young & Partners.

“Today the issue is liquidity and the availability of credit--not interest rates,” said Young. “The ability to lend is still constrained. But the Federal Reserve is pumping liquidity into the system so that banks have access to inexpensive capital to break the vicious cycle.”

The credit crisis started in July 2007 with defaults on subprime mortgages in the US, but this has spread globally, constraining the availability of credit for other mortgages as well as for mergers and acquisitions.

Tightening of credit has affected the chemical industry due to weaker US demand from credit-sensitive end markets such as the housing and automotive sectors.

By: Joseph Chang
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