There are at least two obvious routes through which the ongoing turmoil in European credit markets could be transmitted into this market and economy.

The most obvious and most-discussed is the reliance, albeit much-reduced, of the major Australian banks on offshore wholesale debt markets. The less obvious and less-discussed is the potential for a more localised credit shock.

The banks, apart from reducing their exposure to wholesale debt markets and building up massive liquidity holdings, have the Reserve Bank’s emergency arrangements to call on if they are denied access to funding markets in the event the already dysfunctional Eurobond markets seize up again, as they did in 2008-09.

Australian companies don’t have that backstop and there are already signs that they could face some difficulty accessing credit next year.

At face value there shouldn’t be a major problem. After their experiences during the worst of the financial crisis — when obtaining funding from banks and/or markets became problematical and, to the extent that funding was obtainable, very expensive — the larger Australian corporates have become far more defensive.

They are far more conservatively geared — more conservatively than they have been for decades — have stretched out the maturities of their borrowings, reduced their reliance on bank funding and generally improved their profitability and cash generation.

There are, however, some early warning signs beyond the gyrations in offshore debt markets.

When the finance director of one of the larger and better-performing companies says they’ve been approached by foreign members of their banking syndicates asking for help to sell their exposures it is an indication that the problems offshore are having local impacts.

In fact, there are numerous reports that some of those foreign lenders that remained active in this market after the first exodus of foreign banks during the first phase financial crisis are now retreating.

That’s rational. The European banks in particular are stressed as a result of the sovereign debt crisis and short of capital even before the Basel III capital adequacy regime kicks in. They are under extreme pressure to reduce their new capital requirements by shrinking their balance sheets.

A second wave of withdrawals of foreign lenders would coincide with a very cautious approach to corporate lending — particularly to anything property related — by the domestic banks, which have been in risk-aversion and risk-reduction mode for the past three years.

There is already credit rationing occurring. If the eurozone crisis continues to develop, the availability of funding from banks and/or the market will be threatened.

As it happens, after something of a lull over the past two years as the corporate sector shifted to its more defensive and deleveraged mode, there is going to be a very significant level of borrowings maturing in 2012 and 2013 — particularly in 2012.

Earlier this year Goldman Sachs’ Hamish Tadgell produced an analysis of the refinancing burden facing the companies the bank’s analysts cover. Over the next two years they could have to refinance more than $80 billion of maturing facilities, about 60% of it next year.

While that might appear manageable, in the context of a potential replay of what occurred in 2008, it might be more difficult than it would appear now — particularly if the refinancings scheduled for 2013 and beyond are pulled forward into next year as boards move to secure their funding and financial stability.

Most disconcerting, given how traumatised the sector was as a result of the first phase of the crisis, is that about a quarter of the refinancing required and a third of the companies facing refinancings equivalent to more than 30% of their market capitalisation (according to Goldman) will have to be undertaken by the A-REIT sector.

It is the sector already most shunned by the banks, although traditionally it has been supported by foreign lenders. In any new credit crisis its access to debt funding would be hit early and hard again.

The sector identified by Goldman as having the next biggest funding task is telecommunications — fundamentally Telstra and Optus — which doesn’t generate much concern. Utilities and infrastructure would be more of a concern.

BlueScope Steel’s ability to arrange a full underwriting for the $600 million capital raising it announced this week, despite its obvious distress, is a pointer to the safety valve for corporate Australia.

The Australian equity market has supplied more than $100 billion of new equity to Australian listed companies in the past couple of years, much of it in order to recapitalise and deleverage the companies and other entities most affected by the impact of the crisis on their funding structures.

This year might have been a relatively quiet one for equity market activity but a fresh outbreak of fear and loathing in debt markets, and the knock effects it would have on already cautious bank lending, would almost certainly change that.

The BlueScope raising shows that even for a company which in today’s circumstances is in quite a parlous position, squeezed inexorably by soaring input costs and falling product prices, equity is available — at a price.

It may not be the last big corporate to be prepared to pay that price because of the absence of palatable alternatives.

*This article first appeared on Business Spectator