Banks Make Quick Decisions When Better Credit Quality is the Goal

By Ron Doyle

In Canada, we have recently seen two well-established companies filing for protection: Hart Stores Inc. and Norgate Metal. In neither case did the creditors nor the credit insurers suspect that the companies were about to file. In the Hart Stores case, two credit insurers reviewed the portfolio just prior to the company filing and found, that while the company had experienced a small loss at year end and another small loss at the end of the first quarter, there wasn’t any reason to reduce coverage. What wasn’t anticipated: these small losses resulted in the company’s bank refusing to renew the Line of Credit and then the company’s inability to find new financing in today’s market.

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Contagion – now a word heard often in relation to economic financial crisis

By Ron Doyle

When I wrote a series of blog posts, starting in July 2010, “contagion” was a word seldom heard in a financial context. Six months later, it’s a buzz word in the papers every day and used in the same context as in my blog posts.

The premise for "contagion" is that large sovereign debts can not be contained to one or even a group of countries. The infection spreads to other countries and financial institutions. Brian Milner in his Globe and Mail article of November 30, 2010, Contagion spreads to euro zone banks, and Rex Merrifield, in his Reuters UK story, Euro zone periphery hammered as default fears rise - also published in the Globe's Report on Business - clearly explain how the contagion is likely to spread further.

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