CORPORATE BRITAIN is facing a refinancing timebomb this year as more than £50 billion of bank debt expires during the biggest credit crunch in global history.

The soaring cost of capital and the paucity of available debt financing will squeeze even blue-chip companies which need to renew or restructure existing loan facilities.

According to the ratings agency Standard & Poor’s, a £140 billion debt mountain needs to be refinanced in the UK between now and 2011. Meanwhile, a cumulative total of €1.6 trillion (£1.5 trillion) of debt rated by S&P will mature across Europe between now and then.

David Brooks, head of M&A at Grant Thornton, said: “It is going to be very tough. A lot of the big corporates whose debt does not mature until the end of 2009 are looking to refinance now or at least go to the market in good time. But the lenders who have been told off for being too cavalier are being cautious about who they are going to lend to and how they are going to price it.

“It is going to get worse before it gets better. There are still some big refinancings that will cause indigestion in the system.”

Gareth Davies at Close Brothers said: “Refinancing risk is significant. There is no new money available and so in most cases the borrower will have no choice but to renegotiate a facility extension with the existing syndicate. In the past it was the borrower who dictated the terms of a refinancing; now the tables have turned. For many companies, securing access to the capital will be the key issue, rather than how much they pay for it.”

A recent report by Goldman Sachs estimated that half of the companies it covers will have to cut capital spending and 60% will need to hold dividends flat to maintain appropriate debt levels. The S&P statistics are unlikely to include £22 billion of commercial-property loans due to mature in 2009.

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