The blog has recently noted a major change of mindset in the financial community. As the Financial Times commented this week:
"For the first time in a long time, banks seem to be in control of their lending policies. During the credit boom, the banks were held hostage by companies and private equity groups, as they chucked their balance sheet behind deals almost for free, in exchange for higher margin investment banking products such as advising on mergers and acquisitions. Today, the banks are controlling their lending decisions."
A rare interview today with INEOS CEO, Jim Ratcliffe, in The Times confirms this trend. It notes that INEOS's covenant waivers in the spring came at a high price in terms of interest charges. And Ratcliffe comments that "Under our agreement with the banks, we need to generate levels of cash which it is difficult to imagine the business doing. At some stage there has to be an asset sale".
The Times reports that "the total sum that must be raised is €700 million in two "bullet" repayments". And it says that Ratcliffe "thinks that a sum of €250 million due in January 2011 is manageable 'with a fair wind', but the second tranche in July of €450 million is 'quite a large slug'".
As Ratcliffe notes, Ineos could reasonably expect in the Boom period to make €2bn EBITDA. But this target will be hard to achieve in the future, if we are moving to a 'new normal' of slower growth and less debt, as the blog set out in its 2010 Budget Outlook. With INEOS debt at €7.3bn, the risk is that the banks will become increasingly hard taskmasters.