Here comes a $46 trillion tsunami of maturing corporate debt

Monday, May 28, 2012
By Paul Martin

Debt crisis: a $46 trillion problem comes sweeping in

Bad stuff, they say, comes in threes. We’ve already got the banking and the eurozone sovereign debt crises. Next comes the corporate funding crisis.

By Jeremy Warner
TelegraphUK
28 May 2012

Just as you thought things couldn’t get any worse, credit markets are about to be hit by a veritable tsunami of maturing corporate debt. Standard & Poor’s estimates that companies in Europe, the US and the major Asian economies require a combination of refinancing and new money to fund growth over the next four years of between $43 trillion and $46 trillion. The wall of maturing debt is unprecedented, raising the prospect of further, extreme difficulties in credit markets.

With the eurozone debt crisis still at full throttle, the Chinese economy slowing fast and a still tepid US recovery, it’s not clear that the banking system is in any position to deal with this incoming wave of demand.

As if the refinancing problem wasn’t already challenging enough, into it all stumbles the European commissioner for internal markets, Michel Barnier, to prove the old saw that there is no mess quite so bad that official intervention won’t make even worse.

A traditionalist French socialist by background, Mr Barnier positively revels in his job as the EU’s top financial services regulator. In a recent interview, he said that he liked the term “shareholder spring” because it implied “a regulation spring, a rule making spring”. Yes, indeed, Mr Barnier likes very much rules and regulations. He wants to regulate everything from pay to solvency. The financial crisis has given him a wide open canvass on which to paint.

After a crisis of the magnitude we’ve just seen, it’s perfectly right and proper, and certainly very human, to want to take immediate steps to fix the system, so as to ensure that this kind of nonsense can never happen again. There is also something to be said for striking while the iron is hot. Leave things too long, and the political will to act melts away.

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