Confidence in credit availability is improving.
The Ernst & Young 1,000 believe credit markets are strong enough to support growth plans, with two-thirds (68%) of our respondents saying credit availability is stable, positive or very positive.
Please indicate your level of confidence in credit availability at the global level
Trend toward debt reduction continues
Strong corporate earnings and improved liquidity have enabled companies to reduce indebtedness levels. Balance sheet leverage has reduced slightly since April 2011. 61% now have a debt to capital ratio of less than 25%, compared to 58% in April 2011.
What is your current debt to capital ratio?
The debt reduction theme, first observed in November 2009 is expected to continue. 78% plan to maintain or reduce their debt to capital ratio in the next 12 months.
How do you expect your debt to capital ratio to change over the next 12 months?
Refinancing to improve capital structure
Most companies are focused on strengthening their balance sheets by refinancing. 29% of respondents plan to refinance loans or other debt obligations in October 2011 compared with 20% in April 2011.
Better availability of lower cost debt will enable companies to improve their capital structures, reduce interest costs and extend maturities. Capital markets are particularly accommodating to larger cap financially stable organizations and the investment grade corporate bond markets are rebounding.
Do you plan to refinance loans or other debt obligations in the next 12 months?
What will be the focus of your financing?
Cash remains the primary funding source for deals
With high cash balances and a growing aversion to leverage, 67% plan to use cash or non-cash equity as their primary funding source for deals, compared with 59% in April 2011.
This trend reinforces the debt reduction theme. Those planning to use debt for acquisitions are more likely to use less than in previous years.
What is your likely primary source of deal financing in the next 12 months?
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