CompaniesCasino Guichard Perrachon SAFollowNatwest Group PLCFollowLONDON, Oct 6 (Reuters) – Debt-laden companies across Europe, Middle East and Africa face a $500 billion refinancing scramble in the first half of 2024, a challenge that could kill off many “zombie” businesses even though an expected peak in rates could bring some relief.Businesses facing rising debt costs after years of low rates will have to compete to secure enough cash in the biggest corporate refinancing rush seen for years, just as banks rein in risk ahead of stricter capital rules.Analysis by restructuring consultancy Alvarez & Marsal (A&M), shared with Reuters, shows the value of company loans and bonds maturing in the six-month period is higher than any other equivalent period between now and the end of 2025.A crunch is looming, finance industry experts said, with many weaker, smaller businesses seeking new private loans and public debt deals just as government borrowing costs – which influence loan rates – are soaring globally.Failure to secure the cash they need at rates they can afford, could lead to insolvencies and layoffs.”Interest rate rises are becoming more and more of an issue for companies, particularly those zombie businesses that have been holding on with a sustained period of low interest rates but just barely able to service their debt,” said Julie Palmer, partner at UK restructuring firm Begbies Traynor.”I think we’re now starting to finally see the fall of some of the zombies,” she added.The term “zombie” is broadly used in a business context to refer to companies relying on support from governments, lenders and investors to stay afloat.This can include restructuring loan repayments, offering reduced rates or other more relaxed terms and can help banks avoid loan write-offs.Reuters GraphicsSigns of distress are already showing. The latest official data from Britain’s Office of National Statistics put corporate insolvencies in England and Wales at 2,308 in August, up 19% on the previous year.Begbies Traynor’s quarterly Red Flag Report on corporate distress, covering the April-June period, found that 438,702 businesses across the UK were in “significant” distress, up 8.5% on a year earlier.British discount retailer Wilko fell into administration this summer, leading to thousands of job cuts.France’s sixth largest retailer Casino (CASP.PA) has just finalised a debt restructuring to avert bankruptcy.”Central banks are taking a breather but aren’t ready to say rate hikes are over,” Nicola Marinelli, assistant professor of finance at Regent’s University, told Reuters. “Banks and private equity shops have waited to see if the tide turned but higher rates don’t allow hiding anymore.”DEFAULT SCENARIOThe Bank of England has urged lenders not to underestimate the risk of corporate loan defaults and to avoid relying on models that measure risk across entire sectors rather than individual borrowers, after England and Wales had the highest number of company…
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