Thursday, January 05, 2012

More Credit Crunches

It's not just BMOHarris/M&I (in Wisconsin.)  Weaker credits are being squeezed.  (See below for Irony of the Decade)

On Friday, December 23rd RG Steel informed their workers at the Sparrows Point plant of their intention of shutting down the steel making end of the mill. According to Steel Market Update sources the “L” blast furnace – which is the only blast furnace at Sparrows Point – had been down for maintenance and would not be brought back online.


G.E. Capital led 10 other institutions in financing the stock purchase sale that created R.G. Steel, including an agreement to provide R.G. Steel with an initial credit revolver. As part of its consideration, R.G. Steel put forth significant collateral, the value of which far exceeded the revolver. Nevertheless, I am told, R.G. Steel’s liquidity is now unstable, in large part, because of a decision by G.E. Capital and other financing institutions to shift substantial funds that are needed to support business operations to “reserves,” to further collateralize and secure the loan.  --Ticker quoting SteelMarketUpdate

The definition of 'marginal loan' is in the eye of the beholder, of course.

But what seems to be emerging is a pattern of calling notes (or tightening the screws).

Ironically, no such thing happened to the Big Banks a few years ago, including the Walking Dead:  Citi and B of A.

No comments: