One of the nightmare scenarios making the rounds is that the "big tycoons" might fail. As business empires implode, goes the nightmare, banks could fall too. Could it really happen?
Yields on corporate bonds have reached junk status, indicating a deep-seated fear of just that.
"There is concern about defaults," says Yuval Zehira, the chief analyst at Tel Aviv-based brokerage I.B.I. "But is the concern realistic? No."
What is true, is that if the credit crunch of the last few months drags out for three or four years, the big leveraged companies - mainly the real estate mammoths - will run out of money. They typically borrowed up to 80% or 90% of the price of the properties they bought.
If they can't take fresh loans or sell assets to repay the loans, then they will default, Zehira says.
Is that a likely scenario? Is it likely that they won't be able to refinance loans or sell assets for three to four years? Zehira thinks not. "I believe that again, the situation has been painted too bleakly. More likely - the banks will start to lend again. We'll have to study the new prices of properties and other assets, which will be a lot lower than a few months ago," he adds.
"There will be bankruptcies but probably not among the big companies. It depends on the repayment horizon. Companies that owe money in the months to come are under real pressure. They need solutions in the space of months. They may persuade banks in exchange for guarantees; or sell assets if they can; or the controlling shareholders can use their own money."
And, Zehira says, even if a tycoon falls, heaven forfend - so what? It's no catastrophe at the economic level. And the banks remain standing. At least, unless screaming headlines spark a panic run.
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