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01. The Legacy of ThecrediT crunch
 Te lack o condence in the inter-bank markets has restricted the ability o many lenders to raise unds. Historically loanbooks themselves were used as collateralor securitised unding provided by largerinstitutions in the inter-bank marketplace. Tis market has all but evaporated. In thelocal market we are hearing rumours inthe market o some well known nameshaving diculty raising unds in this way.Furthermore, non bank lenders do not haveaccess to cash deposits – a key source o unds o the major banks.For many nonbank and second tierlenders they have restricted access to capital.As with any scarce commodity, their capitalis careully allocated within the parameterso least risk and maximum yield. As aresult, we are seeing increasingly toughercredit criteria and interest rates increasing.Unortunately this is not just limited to thenonbank sector. Te mainstream banks are in theposition where they can now pick andchoose the transactions they support. Inthese circumstances, credit is most otenoered on a “take-it or leave it”basis withrisk/reward careully aligned with tougherconditioning.
02. The ThreaT of recession
 Whilst not seeking to add to the currentzeitgeist o ensuing Corporate Armageddon, we have to pragmatically ace the reality o recession. Whilst perhaps not likely tobe as deep as many o our other tradingpartners, the likelihood o recession isurther driving lending down. For lending
 A
 
s te  mpeet flstm test btte te WldEm, we wldve ped b w t ve see bde  bt mbells bedp b vemetl d pe p tepevsl demted Debt Mkets.Ts ws te lde pte t slweess d kk stt emeve. Sdl te mbells stllem fml lked w, w vete ptetl t te deme le lbl em pessvelweke b te d. S wee ete?
Global debt markets are still missingthe very backbone o banking –condence. Oscar Wilde’s words ringtrue today that condence is like virginity – you lose it only once. Banks lost money in the early stages o the credit crunchand still lack the condence to lend toeach other, reinorced urther by the badnews emanating rom a number o globalbanking institutions. Tis is restrictingthe ability o many lenders to unctioneectively, with recession urthercompounding bankers’ heightened ear o bad debts. So how is this refecting itsel in the Australian Debt Markets?
Where have allthe umbrellas  gone?
DEBT 
MARKETS
TIM LEA
so What continues to drive this doWnWard trend?
$60,000$50,000$40,000$30,000$20,000$10,000$08/07ActualSeas. Adj.Source: ABS
cmml L a 07 - J 09
 a BanKer is a feLLoW WhoLends you his uMBreLLa When The sun is shining,
 BuT WanTs iT BacK The MinuTe iTBegins To rain.
”“
The LaTesT coMMerciaL Lending figuresfroM The ausTraLian Bureau of sTaTisTicsTo The end of January 2009, shoW TheconTinuing doWnWard Trend for aLLcoMMerciaL Lending. since The Beginningof The crediT crunch in augusT 2007coMMerciaL Lending has aLMosT haLvedWiTh The Trend seT To conTinue as WeBaLance deLicaTeLy on The precipice ofrecession.
institutions, recession means increased baddebts. Equally, the stock market is ar romorgiving on any nancial stocks that show higher levels o bad debts than their peers.At senior management level, lendersthink globally – with their mindsincreasingly ocused upon the bad economic
Mark Twain was very accurate in the 19th Century in his assessment of bankers -
  8 /  0  7  1  0 /  0  7  1  2 /  0  7  2 /  0  7 4 /  0  7 6 /  0  7  8 /  0  7  1  0 /  0  7  1  2 /  0  7
$M
 
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