As Credit Tightens, Companies Curtail Spending, Expansion

CarMax said this week that it might curtail lending by its financing arm. It laid off 600 workers this month in an effort to save costs. (By Chris Rank -- Bloomberg News)

"The combination of all these capital expenditures, having leverage and falling natural gas prices puts them in a position where they need to sell down some projects," Khani said.

Seeking to reassure investors, the company yesterday said it had arranged a $750 million credit facility with a dozen financial institutions. Chesapeake's stock bounced up 12 percent on the news, but the $18.35 price was just a quarter of its July 2 peak. (On Friday, the company said its chief executive had "involuntarily sold substantially all of his shares" over the previous three days to meet margin calls.)

Other companies are looking for infusions of cash. In the past, they might have issued new stock but with tumbling share prices such moves are currently unattractive if not impossible. Advanced Micro Devices, the heavily indebted semiconductor manufacturer, was fortunate to have concluded months-long talks with an Abu Dhabi state-owned technology investment company. It will unload $1.2 billion in debt, receive a $1 billion cash infusion, and have a commitment from the Abu Dhabi firm to invest as much as $6 billion over the next five years.

"It solves AMD's near-term cash crunch issues," an FBR report said.

Even before the recent crisis, tight credit was putting some projects on hold.

In San Diego, for instance, developers had for two years been planning to erect a $1.5 billion development known as Ballpark Village on 7.1 acres of land near the Padres baseball stadium. The developer's Web site calls it "largest contiguous and undeveloped land remaining in downtown San Diego."

It's going to stay undeveloped for a while longer. The project has been put on hold. Marriott, slated to operate a hotel in the complex, pulled out at the end of August, citing "the situation in the capital markets." Investors in other parts of the development have also been squeezed.

For other projects, the ramifications of the credit freeze aren't yet clear.

Two years ago, the utility Ohio Edison settled a federal lawsuit by agreeing to spend more than $1 billion installing pollution-control equipment on a coal-fired generating station in southern Ohio. It is partway through that project and was planning to raise $600 million this year to finance the next stage.

For now, those financing plans are on hold as the utility waits to see whether the near freeze in lending will come to a rapid end. Tricia C. Ingraham, a spokeswoman for Ohio Edison's parent, FirstEnergy, said "we're waiting."