| Michel Poirier | ||||||
Those in any doubt about how quickly relationship banks can turn a cold shoulder on borrowers should learn from the fall of Enron. The US energy company, a top-10 Fortune 500 company, was a Baa1 credit sitting on top of world-class pipeline business in the traditionally stable utilities sector. Then in November, it was hit with a massive share price slump after a debacle over its off-balance sheet liabilities, failed to turn over its CP outstandings and was put on negative watch by credit rating agencies Moody's and Fitch. It did what any corporate in the same situation would do and turned to its banks, drawing down its existing $3.3 billion credit facility while arranging another $1 billion secured loan facility with JPMorgan Chase and Citigroup.
But not soon enough. After Enron was downgraded to one notch above junk status by Moody's and Standard&Poor's, bankers started demanding security over $3.3