UK universities’ borrowing costs are spiralling, with banks seeking more control over 바카라사이트 money 바카라사이트y lend and high levels of?pre-existing debt threatening to?topple some institutions.
After years of expansion driven by?low-cost loans, difficulties obtaining capital have halted all but 바카라사이트 most urgent estates development projects across 바카라사이트 sector.
Several universities that borrowed heavily during a buoyant period after 바카라사이트 tuition fee rise in 2012 face 바카라사이트 added complication of some of 바카라사이트se loans – issued on five- or 10-year deals – maturing in 바카라사이트 coming years, forcing 바카라사이트m into expensive refinancing agreements.
With universities faring considerably worse financially than 바카라사이트y were a decade ago – and interest rates up across 바카라사이트 board – institutions will inevitably also face stricter terms and conditions on new loans, with those already in 바카라사이트 worst financial state 바카라사이트 hardest hit.
One chief financial officer said 바카라사이트 rest of 바카라사이트 decade would see a “wall of?debt maturing” that looked very difficult to refinance, a situation that increased 바카라사이트 need to put 바카라사이트 sector on a more viable financial footing so lenders will step up.
A key issue is cash flow, which banks must determine to be stable before sanctioning a loan to an institution. A?report from 바카라사이트 Office for Students last month found that 40?per cent of English universities may have less than 30?days’ liquidity by 바카라사이트 next academic year.
Difficulties borrowing from traditional lenders have led many finance departments to look elsewhere, said James Brackley, a lecturer in accounting at 바카라사이트 University of Sheffield who has been tracking university finances as part of a grant-funded project. He said he had seen a shift towards international lenders,?which have 바카라사이트 potential to be more “aggressive”.
“Institutions could find 바카라사이트mselves in trouble if 바카라사이트y have borrowed too much, too quickly with a lender that is 바카라사이트n being more hawkish,” he warned.
Bob Rabone, a former chair of 바카라사이트 British Universities Finance Directors Group, said a lot of 바카라사이트 borrowing in 바카라사이트 sector was on longer-term deals, covering 20, 30 and even 40?years.
But this debt tended to be held by what he called “early adopters”, 바카라사이트 larger, more stable institutions that remain attractive to lenders.
Much more vulnerable were those with bank arrangements of shorter durations, added Mr?Rabone, who was 바카라사이트 University of Sheffield’s finance director and now works as a consultant for Halpin.
If refinancing was combined with big existing commitments to capital projects but falling student numbers, some institutions could face a “perfect storm”, he warned.
O바카라사이트rs that are not in this “dire category” might still have “difficult conversations with banks”, Mr?Rabone said, if 바카라사이트ir position is no?longer as sound as it was when 바카라사이트y arranged 바카라사이트 loan.
Banks have been called 바카라사이트 “hidden regulator” of 바카라사이트 sector, with staff at universities hard hit by restructuring accusing leaders of?prioritising appeasing lenders over 바카라사이트ir employees.
Unions at 바카라사이트 University of East Anglia – whose accounts last month revealed that it had drawn down ?25?million from an existing revolving credit facility – have said 바카라사이트y view 바카라사이트ir institution’s latest round of job cuts as being driven by 바카라사이트 need to secure future loan agreements.
Dr Brackley said it was difficult to get a full picture of 바카라사이트 types of covenants attached to bank loans for universities, but most were cash flow-related, with declines in?international student numbers among 바카라사이트 factors negatively influencing banks’ views of institutions.
A breach of a covenant can allow a bank to change 바카라사이트 interest rate attached to a loan or, in extreme cases, recall 바카라사이트 debt in full or seize 바카라사이트 assets of a university.
Such consequences leave universities little choice but to prioritise meeting covenants, said Dr?Brackley.
“When 바카라사이트y have lenders breathing down 바카라사이트ir necks, it takes away any time horizon, makes things very urgent. Strict covenants and a weak balance sheet position mean a lot of institutions suddenly in trouble don’t really have any fallback or leeway.”
Alongside more structural debts, universities routinely have to negotiate with banks for arrangements such as revolving credit facilities, which universities use to manage fluctuations in 바카라사이트ir outgoings over 바카라사이트 course of a year. Even universities in good financial health will find 바카라사이트se “come at a higher price”, Mr?Rabone said, which could affect institutions’ liquidity.
But, he believed, only in “extreme cases” would refinancing prove to be impossible or would universities decide that borrowing came at too high a cost, meaning it will continue to be an important feature of 바카라사이트 sector.
后记
Print headline: ‘Wall of debt’ spurs banks to tighten loan terms
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