The Impact of Tighter Credit.

Tough times mean tougher terms for borrowers -- especially risky ones. A random sampling of 303 members of the Turnaround Turnaround

A situation where a company that has had poor performance for an extended period of time experiences a positive reversal.

Notes:
A speculator may profit from a turnaround if he or she accurately anticipates the improvement of a poorly performing company. Management Association earlier this year reveal what corporate renewal professionals are observing as a result of credit tightening on troubled companies. Company hurdles in getting a loan:

* 8 out of 10 see troubled companies facing more difficulty getting refinancing Refinancing

An extension and/or increase in amount of existing debt. with existing lenders and more difficulty finding replacement financing.

* 7 out of 10 note more difficult conditions to be met before loans can be closed.

* 6 out of 10 believe more restrictive covenants Restrictive covenants

Provisions that place constraints on the operations of borrowers, such as restrictions on working capital, fixed assets, future borrowing, and payment of dividends. are in the loan documents to protect lenders.

Eventual effect of credit market on troubled companies:

* 7 out of 10 believe the impact will be greater potential for loan covenant A loan covenant is a condition in a commercial loan or bond issue that requires the borrower to fulfill certain conditions or forbids the borrower from undertaking certain actions, or possibly restricts certain activities to circumstances when other conditions are met. violations, lenders will exert more influence in resolving the situation and more companies will reorganize re·or·gan·ize
v. re·or·gan·ized, re·or·gan·iz·ing, re·or·gan·iz·es

v.tr.
To organize again or anew.

v.intr.
To undergo or effect changes in organization. under Chapter 11.

* 6 out of 10 believe companies will find ways to recover without having to resort to Chapter 7.

COPYRIGHT 2001 Financial Executives International
No portion of this article can be reproduced without the express written permission from the copyright holder.

Reader Opinion

Article Details
Printer friendly Cite/link Email Feedback
Publication:	Financial Executive
Article Type:	Brief Article
Geographic Code:	1USA
Date:	May 1, 2001
Words:	157
Previous Article:	Security Heads AICPA's Top 10 Technologies.(American Institute of Certified Public Accountants)(Brief Article)
Next Article:	The Impact of IM.(instant messaging)(Brief Article)
Topics:	Banking industry Management Business financing Commercial loans Evaluation Corporate turnarounds Finance Turnaround management Finance

Related Articles
Research Tradition in Occupational Therapy: Process, Philosophy and Status.
Bank and nonbank competition for small business credit: evidence from the 1987 and 1993 National Surveys of Small Business Finances.
What Contributes to Job Satisfaction Among Faculty and Staff.(Review)
A question of quality.
Attitudes of Internal Medicine Physicians Toward Type 2 Diabetes.(Statistical Data Included)
Ohio regulator Covington scrambles to stay ahead of changing issues. (Briefing).(Insurance Director Lee Covington)(Brief Article)
The Greening of Georgia: the Improvement of the Environment in the Twentieth Century.(Book Review)
Stephen L. Ross and John Yinger, The Color of Credit: Mortgage Discrimination, Research Methodology and Fair Lending Enforcement.
Reducing social work students' statistics anxiety.