FRONTLINE

Secured Lender, The, Sep/Oct 2006 by Cove, Brian P

"There remain some concerns among lenders about the longer-term health of the economy."

For the third consecutive quarter, lenders reported moderately stronger growth plans by customers. Twenty-one percent said their customers had "strong" or "very strong" growth expectations, up from the 16 percent who said the same last quarter.

Lenders also reported more aggressive plans by customers in the next six to 12 months:

Lenders expect loan demand to remain relatively unchanged, although 46 percent predicted small business lending would increase in the next six months. They also remain on the alert for loan losses, with 65 percent predicting an increase, and expect a rise in interest rates, which 88 percent anticipate.

More than 85 percent of lenders reported plans to maintain their existing loan structures in the $1 million to more than $10 million loan size categories.

Roughly 70 percent of lenders plan to maintain their interest rate spread and fee structures on similar credit quality loans. In the greater than $10 million loan category, 29 percent of respondents said they planned to reduce the interest rate spread and fee structures.

The Phoenix Management Services "Lending Climate in America" survey is conducted quarterly to gauge shifts in lenders' attitudes toward the economy. Ninety-one lenders from commercial banks, commercial finance companies and factors across the country were surveyed this quarter. Respondents completed a written questionnaire during May.

Businesses urged to plan for potential bird flu pandemic

With growing evidence that the potential for a worldwide outbreak of avian flu is possible in the near future, businesses in the United States are being advised to prepare contingency plans to deal with the disruptions a global bird flu pandemic could cause.

The H5N1 bird flu, identified in 1996, is virulent in bird populations, has a high lethal rate in humans, and bears similarities to the H1N1 virus of the 1918-19 pandemic. H5N1 has spread throughout Asia, Middle East, Europe, Russia, Africa and the UK.

The U.S. Centers for Disease Control estimates that over 200,000 people would die in a moderate pandemic and cost the U.S. economy $100 billion; a worst case scenario would cost the economy about $450 billion with over 1.9 million deaths- 1 person in every 150. The Lowry Institute of International Policy estimates a worst case scenario would result in over " 140 million deaths worldwide and a $4.4 trillion dollar impact upon the world economy" plunging the world into a global depression.

How will companies feel the impact?

1. High absenteeism for extended periods: sick employees; employees staying home to nurse sick children or spouses; others staying home to avoid getting sick.

2. The influenza is expected to last 18 to 24 months and come in three waves, each wave with a different level of severity, lasting for a month or more. Waves can start at anytime of the year;

3. Suppliers may not be able to support their customers fully, if at all.

4. Suppliers may lose customers because they can't supply them.