Prepare for the next phase of the credit squeeze. Ten months after the money markets first froze up, we have been through the turmoil in the financial markets and the recapitalisation of the banking industry. Now we are beginning to learn how the crisis will impact companies around the world. The initial indications are not pretty.
First, though, some good news. With a handful of notable exceptions, most large companies have come through the storm in reasonably good shape. Despite five years of easy credit and pressure from private equity groups willing to gear up to the hilt, most corporations have maintained strong balance sheets and resisted the temptation to borrow heavily. Call it inertia or prudence. Either way, it now looks smart.
