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Market conditions loosen the purse strings: the buoyant market is making bankers more willing to lend, and service centers more willing to borrow.

Article Excerpt
With the economy on the comeback and capital readily available, conditions are ripe for a modest rebound in capital spending by service centers this year.

The latest Metal Center News survey data indicates that most service centers will spend at least as much, and many will spend more, on capital projects this year (see related article on page 18).

Likewise, financial experts agree the timing of the upturn in the metals cycle gives service centers greater access to cash for capital spending.

"Your research is consistent with all informal survey we did among our customers and others we call on in the steel service center sector," says Mark Smith, senior vice president of metal industry sales at GE Corporate Lending Group, Norwalk, Conn. "Most service centers have credit facilities that allow liar a certain amount of capital expenditures. In the past three years, companies have not come anywhere near the cap ex limitations that their financing arrangements would allow. The state of the market was such that they didn't feel it was prudent to do an expansion, or decided to delay maintenance projects that could be held."

Instead, he says, distributors "wanted to preserve liquidity on their balance sheets for better times, when the market was more buoyant. The liquidity saved for a rainy day is probably suiting them well at this point."

Deborah Allen, president of Rutledge Research, Westport, Conn., which tracks the valuation of equities and corporations, says the borrowing environment is better than it has been in at least five years. She...

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