IRISH corporations looking to raise funds in the capital markets are being forced to pay a ‘Paddy premium’ as concerns over the health of Ireland’s banks and the economy at large have made investors wary of lending to all Irish firms, treasury experts have warned.

They say worries about Irish sovereign debt are causing lenders to assess credit applications from Irish companies in more detail and prompting them to charge a premium for country risk, even to companies unaffected by the banking crisis.

“The troubles in the government debt market are having a negative impact on the credit assessment of Irish companies by non-Irish banks,” said John Finn, managing director of Treasury Solutions. “Uncertainty about the government is spilling over into the corporate market.”

Finn said the appetite among banks for doing deals with Irish corporates was being suppressed by fears that another major crisis was on the cards for the Irish economy after the banking crisis in 2008 and the sovereign debt crisis which began last spring.

“Reputations that grew over a decade or more have been dashed in the past six months and will require rebuilding as a result,” said Finn.

He said the cost of borrowing for companies lucky enough to get funding will rise as lenders try to price in uncertainty over Ireland.

Ireland’s fiscal credibility will be tested by the upcoming budget, but the market may have already made its mind up, said Oliver Gilvarry, senior analyst with Dolmen.

“They do see we’re trying to do austerity and be realistic, but some ways it just doesn’t matter,” he said.

Larger companies with minimal exposure to the Irish market, such as CRH or Glen Dimplex, are expected to fare better as creditors place their bets beyond Irish shores, Finn said. Smaller exporting firms will have to pick their foreign bank carefully, he said, but foreign exchange business was still attractive for banks.