SYDNEY: Australian companies are coming to terms with higher borrowing costs, as the country faces its first recession in almost three decades amid the coronavirus pandemic. The average three-year loan margins have jumped to levels not seen for six years in 2020, according to Refinitiv LPC data. Investment-grade borrowers are paying an average of 143bp, up from 85bp in 2019, and speculative or unrated issuers 348bp, compared to 217bp last year.
A glut of financings from hard-hit sectors such as travel and energy have pushed average margins higher, but less-affected borrowers have also had to pay up as banks grow more risk averse. "The cost of capital for the banks is more expensive, and that is going to be passed through to borrowers through increased margins," said Gavin Chappell, head of syndications for Australia at ANZ.
Blue-chip companies such as energy retailer Origin Energy, construction and property group Lendlease Group and flag carrier Qantas Airways are among those paying up to borrow from banks as their businesses have succumbed to virus-induced lockdowns and a plunge in oil and gas prices. Australia's A$2trn (US$692bn) economy shrank 0.3% in the first three months of 2020 as many businesses were forced to shut to contain the spread of the coronavirus.
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