Nickd92 wrote:ThePointblank wrote:32andBelow wrote:So they are going to have to put their big boy pants on. Many go into a bit of debt and get through it. Maybe it’s time for US companies to raise money as opposed to more and more stock by backs.
That's if lenders are willing to lend money in the current environment. A lot of investors and banks are spooked pretty badly right now.
If lenders aren't willing to lend money, or are only willing to do it with subprime rates, it will hasten the demise of airlines that don't have a strong fiscal cushion to fall back on.
Then what happens when they receive all them assets that they cannot shift unlike in Normal circumstances? It's in the best interests of the banks to keep theses businesses going. Otherwise they'll be no one with any Capital out there to start up once we are back to Normal.
No, what will happen is that banks will then quickly move to secure the collateral and liquidate the assets ASAP, even if they take a bit of a loss in an attempt to recover their money, especially if they start feeling pressure as depositors start withdrawing their money.
It also affects future loans and re-negotiations for existing loans as well; banks will be far less willing to lend money, and for existing lenders who need to renew their loans, they might find it significantly more difficult to refinance the loans as a result, with higher interest rates and collateral requirements as a result.
Banks may also experience their own liquidity crisis as well if they have too many loans that they suddenly struggle to collect on, and depositors suddenly move to pull their money out of the bank, causing a bank run.