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Call for businesses to renegotiate funding earlier

Wednesday 3rd March 2010

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New Zealand businesses need to renegotiate their funding facilities earlier rather than later, according to Bancorp Treasury Services.  

The financial advisory firm warns too many companies are gambling on refinancing costs coming down and have put themselves at risk of default by leaving negotiations with banks to the last minute.  

“Credit is still not readily available and there’s a lot of competition for it,” said Carl Griffiths, associate director at Bancorp Corporate Finance, a sister company to Bancorp Treasury Services which advises on mergers and acquisitions.

“Businesses can be caught out because banks are being very selective and exacting – they’re really putting funding applicants under the microscope.” 

Finance companies have been at the pointed end of renegotiating funding facilities, with the beleaguered South Canterbury Finance forced to tap George Kerr’s New Zealand Credit Fund last year after its $100 million facility was cancelled.

Geneva Finance, one of the more successful finance companies to enter into a moratorium arrangement when the property development market fell over, had its credit rating cut to CC from CCC by Standard & Poor’s last month after it was forced to renegotiate a five-year exit from its $35 million facility with BOS International.  

Griffiths said banks prefer to offer a range of funding options rather than just a loan, and he encourages companies to begin the funding rollover process a year out from when debt starts coming due.

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