Carl Marks Advisors survey predicts lenders will start lending to underdeveloped companies despite problems forecasting earnings

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NEW YORK–() – The flexibility that banks and alternative lenders have demonstrated towards medium-sized borrowers during the COVID-19 pandemic should change in the first quarter of 2022, according to the new Carl Marks Advisors a survey of financial services executives and consultants. Survey respondents said lenders may soon begin lending to businesses that are underperforming or at risk of default, and they believe this process will be complicated by the ongoing difficulties companies face in accurately predicting their earnings. Revenue forecasting is likely to be a problem in 2022, according to the survey.

Interestingly, while the majority of respondents believe that banks and other lenders will be less flexible with borrowers in early 2022, they also believe that these institutions may face difficulties in returning capital. In fact, less than 13 percent of those surveyed said lenders have good prospects for returning their capital to midsize companies in the event of a default linked to a pullback in the economy.

“Over the past 18 months, lenders have proven more flexible than anyone expected, in part because companies are facing unprecedented challenges. However, our survey shows that we are approaching a turning point where bankers and lenders feel it is time to start tackling the problem of excess leverage and easing credit conditions with borrowers whose future prospects are volatile or unpredictable, ”said Brian Williams, a partner in Carl Marks Advisors, a leading midsize investment banking firm. “Respondents also agree that the process will be significantly challenging as many companies have not been able to reliably forecast their revenues due to the impact of COVID, supply chain problems, labor shortages and other obstacles. This will make negotiations with creditors more difficult and contentious. ”

Key survey findings include:

  • 75 percent of respondents believe that lenders will stop “challenging” loans to mid-sized companies by the first quarter of 2022.

  • Only 38% of respondents believe that by that time the forecasting of the income of these companies “normalized”.

  • 84 percent of respondents are equally or more concerned about leverage and soft lending terms compared to the end of 2020.

  • Only 12 percent of those surveyed said that lenders have good prospects for recovering their capital from mid-sized companies in the event of default.

  • 75 percent of respondents believe that the current period of inflation, which contributes to higher prices for materials and goods, will last six months or more.

  • 41 percent of respondents do not believe supply chain problems and shortages for US companies will be resolved by the end of 2021.

Carl Marks Advisors conducted an online sentiment survey from June 30 to July 16, 2021. A total of 125 responses were received from financial services executives, consultants, and investors located in the United States and across various industries.

About Carl Marks Advisors

Carl Marks Advisory Group LLC (Carl Marks Advisors) is a New York-based investment bank that provides financial and operational advisory services. Our integrated customer service teams combine industry, manufacturing, and transactional expertise to deliver effective solutions to challenging situations. The securities are offered through Carl Marks Securities LLC, a member of FINRA and SIPC. Additional information on Carl Marks Advisory Group LLC and Carl Marks Securities LLC is available at www.carlmarksadvisors.com and www.carlmarkssecurities.com

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