Now that’s an expensive hair cut

The latest turn of events in the seemingly never ending Greek debt debacle has resulted in a deal involving 172bn Euros worth of debt, with investors taking a total loss of up to 74%.

However as the international banking community digests another serious blow to its capital structure (e.g. ABN’s Greek losses estimated at US$ 1.16 billion) the UK banking community will not be immune. At the very least there will be a renewed focus on exposure and this will impact on their willingness to lend.

Even at this stage there is a feeling that the problem has been kicked down the road. It is a parallel situation to any company dealing with a recalcitrant debtor. Fearful of realising a loss further credit is extending in the forlorn hope that it’s not good money after bad. Unfortunately in many cases this is exactly what comes to pass.

Now more than ever businesses must demonstrate that they have full control over all aspects of their operations. Reporting procedures must be rigorously observed and any potential problem areas or customers brought quickly into line. As it becomes harder to borrow, positive cash-flow is critical.