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July 27, 2011
Despite Sluggish Economic Signs
CONTACT: Michael Jacoby 610-358-4700 mjacoby@phoenixmanagement.com
PHILADELPHIA (July 27, 2011) —- Results of the second quarter Phoenix Management “Lending Climate in America” Survey signals encouraging changes in the lending environment based on relaxed loan standards. The survey also suggested slow growth in the economy as evidenced by signs of decreased loan demand expectations.
Lenders report lending standards are being relaxed relative to prior survey periods as the credit cycle trends to a more aggressive loan market. The percentage of respondents planning to relax their loan structures increased to 21%. That is 4% higher than the previous quarter. The survey also showed that 40% of lenders indicated their financial institution would consider a loan request with a Senior Debt to EBITDA multiple as high as 3 to 3.5 times, up 17% from the previous quarter. Further, 39% of respondents anticipate easing lending spreads from their current levels (versus 27% the previous quarter).
“This quarter’s survey indicates that the lending community is returning to an aggressive stance towards loan structures as lenders are refocusing their efforts on gaining market share ” making it somewhat of a borrower’s market” says Michael Jacoby, Phoenix Senior Managing Director and Shareholder. “This should provide a welcome change from the past few years when borrowers experienced significant difficulty in obtaining replacement financing and working capital lines of credit to finance growth and/or the execution of turnaround plans.”
The survey showed that domestic lending expectations experienced a minor retreat in Q2 2011 versus the previous quarter. The overall index for all domestic lending segments decreased by 6% in comparison to last quarter’s survey. Respondents indicated that, on average for all domestic lending categories, 56% have expectations for increased loan demand (versus 64% in the prior quarter). Lastly, lenders expectations for the economy’s growth remained relatively unchanged for the next six to 12 months compared to the previous survey. Lenders expect the economy to perform at a “C” level for the next six months, which is similar sentiment from the previous survey.
To see the full results of Phoenix’s Lending Climate in America Survey, please visit http://www.phoenixmanagement.com/survey/
For over 25 years, Phoenix has provided smarter, operationally focused solutions for middle market companies in transition. Phoenix Management Services provides turnaround, crisis and interim management, specialized advisory and operational due diligence services for both distressed and growth oriented companies. Phoenix Capital Resources provides seamless investment banking solutions including M&A advisory, complex restructurings and capital placements. Visit www.phoenixmanagement.com & www.phoenixcapitalresources.com
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