Banking Crisis Imminent? Companies Scramble To Draw Down Revolvers

• Banking Crisis Imminent? Companies Scramble To Draw Down Revolvers
  by Tyler Durden, https://www.zerohedge.com/
  Earlier today, we reported that Boeing shocked the investing community when it announced that due to “market turmoil”, it would immediately draw down on its full $13.825 revolving credit facility, an unprecedented move for a company Boeing’s size and valuation, and one which was some took as an indication of how frail Boeing’s liquidity state was, ostensibly confirmed by Boeing’s surging default odds measured by its 5Y CDS.
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  We disagreed: after all, why would Boeing rush to draw attention to its own funding challenges by fully drawing on its revolver when it knew full well that it had access to the money, safe and sound, located at its syndicate banks…  unless of course Boeing was in fact worried about the viability of said banks. AS a result, we said that the real reason Boeing did what it did was simple, especially to those who recall what happened in 2008 all too well: Boeing is worried that banks will pull their committed funding, which in turn means that Boeing appears to be worried that a 2008-style financial crisis is imminent, and is shoring up all the liquidity it can, so as not to remain at the mercy of its banks which may refuse to extend it credit at any one moment if their own liquidity is threatened.
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  Which is why we also concluded that now that Boeing, “one of America’s most valuable companies, has shown which way the wind blows, expect thousands of less creditworthy companies to follow suit as they scramble to cash in on every dollar in available revolver funding before the banks pull it.“
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  We had to wait just a few hours for this prediction to come true, because later on Wednesday, Bloomberg reported that two of the world’s biggest PE firms, Blackstone and Carlyle, have told their portfolio companies to immediately do what Boeing did earlier in the day: “Do whatever it takes to stave off a credit crunch”, which as in the case of Boeing, is a polite way of saying: your banks may pull their liquidity (i.e., fail), so get whatever cash you can now when you can, and not when you have to.
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  According to the report, the dozens if not hundreds of businesses – all smaller than Boeing of course – controlled by the PE titans are joining a growing wave of corporations drawing down bank credit lines to help prevent any liquidity shortfalls amid signs of mounting stress in markets. At Blackstone, which has weathered a variety of crises in its 35 years, the focus is on sectors hurt by the coronavirus, such as the hospitality industry, as well as energy firms facing a slump in oil prices.
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  At Carlyle the measures aren’t quite as widespread yet, although the firm has been having broad discussions with management teams at portfolio companies and recommended drawing credit lines in certain instances, with the “decisions are based on industries, regions and other factors.”
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  Beside Boeing, Blackstone and Carlyle, other companies which announced plans to drawdown on their full revolver were Hilton Worldwide and Wynn Resorts, all reflecting the uncertainty coursing through corporate America as the US economy hurtles into recession.
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  read more.

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