It appears that many of the companies that borrowed through the subprime market will take it on the chin.

The report shows that about $680bn of loans will mature between 2008 and 2011 compared with only $180bn of maturing high-yield bonds.

Mariarosa Verde, head of credit research at Fitch, said the loan market was “critical to the wellbeing of these companies”.

Many highly leveraged firms rely on their ability to roll over existing loan debt into new loans rather than repay it when it matures, which they often cannot do.

The basic calculus is this:

• Longer term loans are far riskier to the lender. It ties up the capital for a longer period, and there is a greater risk that the interest fall below market rates.
• Risk requires greater return, so long term bonds are more expensive
• Companies that get junk bonds cannot afford the rates of longer term loans, so they get short term ones, and roll them over at the end of the term.
• When these loans come due, they refinance.
• If rates have increased significantly, they take it on the chin, bankruptcies and liquidation.
• This increases the risk, and hence the interest rates, putting more companies at risk.

Greenspan’s policy of flooding the market with liquidity after the dotcom crash will have dire consequences in the next few years.