Cerebro Capital, an online platform that allows middle-market borrowers to source credit facilities, saw a surge in demand for its services amid the tighter lending market, according to Allan Smallwood, senior director of capital markets at the firm. At the end of July, Cerebro helped a fifth generation family-owned commercial printing business close a deal after its existing bank lender exited when it tripped a loan covenant, he said.
Haves, Have Nots
Of course, the tale of diverging ‘haves’ and ‘have nots’ is hardly new in credit, manifesting when economic turbulence prompts lenders to retrench and investors to seek the relative safety of stable, blue-chip firms.
But the magnitude of the disparity this time around is more alarming when combined with expectations for record corporate defaults this year and following second quarter data showing the economy suffered its sharpest downturn since at least the 1940s. A growing chorus is also warning on inflation, which can hit smaller firms particularly hard. One of those is Larry McDonald, founder of The Bear Traps Report investment newsletter.
“It’s an inequality explosion in terms of financial sustainability,” said McDonald, who also authored the book ‘A Colossal Failure of Common Sense’ about the demise of Lehman Brothers Holdings Inc. “You have financial conditions tightening in some spots, and then wide open for the big guys -- it’s crazy.”
This article was provided by Bloomberg News.