Brexit Means Urgent Refinancing as Credit Risks Loom, KPMG Says

(Bloomberg) -- Mid-size U.K. companies may have just two months to refinance before a probable Brexit squeeze in credit markets, according to KPMG.

Borrowers should lock down “refinancing before the end of October,” particularly exporters exposed to sales in euros, Joe Cassidy, KPMG’s Brexit banking and capital markets lead, said in an interview. “If you’re going to rush to refinance just before March, I think you’ve missed the window.”

U.K. mid-caps have at least 185 billion pounds ($240 billion) of debt, based on Bloomberg data for FTSE 250 members, which may become harder to refinance if Brexit disrupts trade and cross-border financial regulations. Uncertainty could also be exacerbated by the U.K. only reaching an exit deal with the European Union at the last minute or leaving without an agreement on March 29.

Either scenario could lead to a “tightening of liquidity,” said Cassidy, who previously worked at Barclays Plc, Deutsche Bank AG and Lloyds Banking Group Plc. Based on the 2008 global financial crisis, mid-cap companies with pound-euro exposure are likely to provide an “early indicator” of any squeeze, he said.

KPMG has also advised clients to take steps including reviewing banking relationships to help prepare for regulatory upheavals caused by Brexit.

Talks between the U.K. and the European Union are due to resume Friday as the two sides seek to break months of deadlock. The U.K. said this week that the EU must compromise on its position or else risk a “no deal” Brexit amid further slips in the timeline for reaching an accord.

©2018 Bloomberg L.P.