Crif Ratings believes that the debt available to small and medium-sized Italian enterprises in 2016 may undergo contractions as a result of the turbulence on the financial markets caused by the unexpected result of the referendum on Brexitturbulence which is very likely to persist in the medium term as well.
In 2016, the company that issues ratings to companies under EU legislation forecast a reduction in both bond and bank debt volumes. It is very likely that investors will focus on sectors with stable revenue generation and regional geographic exposure such as utility and infrastructure in general, while the sectors most exposed to the risks of volatility in the prices of commodity and to exchange rate fluctuations they will have less 'appeal'.
In the first half of 2016, the volumes of bonds issued by so-called 'large corporates' Italian companies reached 7.3 billion, marking a 23% reduction compared to the volumes of the same period in 2015; similarly, the volumes issued by small and medium-sized enterprises on the domestic market decreased by 21% in the first half of 2016 compared to the volumes issued in the first half of 2015. The slowdown in issues was more severe in the second quarter, becoming increasingly uncertain l outcome of the public consultation in the UK.
The announcement of the Corporate Bond Purchase Program (CSPP) by the European Central Bank ('ECB'), as an unconventional measure to strengthen the transfer of more favorable financial conditions to the real economy through the direct purchase of corporate debt, has not yet had the expected effects on debt volumes issued. However, it should be underlined that due to the eligibility criteria of the programme, which requires a minimum rating level of investment grade, the number of Italian non-financial companies that will reasonably benefit from this measure will probably be very limited and confined, again, to the more stable such as utilities.
The mass of small and medium-sized Italian enterprises, and in particular those exposed to exchange rate and commodity price risk they will have fewer opportunities on the bond market in the short term and at least until the conditions of the financial markets recover stability with respect to the volatility recorded in recent days.
The volumes issued by small and medium-sized Italian enterprises in the first half of 2016 dropped to 160 million compared to 630 million in all of 2015. In turn volumes in 2015 decreased by about 60% compared to those of 2014, which reached the record level of 1.5 billion, the highest level since the opening of the domestic bond market to unlisted companies, as required by law decree n.83/2012 'Development Decree'.
As for the banking sector, corporate credit risk appetite could wane. Concerns for the profitability of banking institutions they will be a strong deterrent to continuing the aggressive competition with the bond markets for corporate credit triggered by 2015 thanks to access to the convenient financing conditions for banks introduced by the ECB with the TLTRO programme.
Ultimately what is emerging is not an optimal situation for access to credit for Italian companies, which will probably be reflected in the revision of investment plans and will lead to a rethinking of long-term growth strategies.
