InterviewChem debt, equity financings freezes

22 September 2008 20:42  [Source: ICIS news]

By Joseph Chang

NEW YORK (ICIS news)--Global chemical debt and equity financings fell dramatically in the first half of 2008, and the future remains uncertain, a banker said on Monday.

“The high-yield debt market is essentially at a standstill, heavily driven by the ongoing debt crisis,” said Peter Young, president of Young & Partners, a US investment bank.

Non-bank debt financing totalled $5.3bn (€3.7bn) in the first half, a significant drop on an annualised basis compared with $18.8bn in 2007, according to Young & Partners. High-yield debt issuance fell even more dramatically, totalling just $180m in the first half versus $6.2bn for all of 2007.

“The US government bailout fund is not yet finalised or passed by Congress, so it is hard to say what it will look like in its final form. For that reason, it is hard to say whether it will help the financial world and the US economy,” he added.

The current credit crisis is hurting chemical companies’ ability to borrow when they need to, Young said.

However, the bigger issue is the impact of the crisis on the global economy and the customers of the chemical companies, he said.

“To the extent that the US government bailout causes financial institutions to lend again and stabilises the equity and debt markets, the beneficiary will be the economy and the availability of credit,” Young said.

“This will help the chemical companies in terms of their revenues and, to a certain extent, their ability to borrow,” he added.

Equity financing also fell significantly, Young said. On the equity side, the first half saw eight equity offerings, which raised a total of $1.8bn versus 22 offerings worth $8.7bn for all of 2007.

The first half included just one initial public offering (IPO) – that of US fertilizer company Intrepid Potash – which raised $960m, versus 11 IPOs totalling $3.5bn in 2007, Young said.

“The current crisis in the financial markets and the weakening global economic environment is severely inhibiting all equity financings,” Young said.

“You have a downturn in the chemical cycle plus a paralysed IPO market overall. The combination is deadly,” Young said. “When the IPO market closes for chemicals, it can close for a long time.”

($1 = €0.69)

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Author: Joseph Chang
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