“We’re going back to the Stone Age,” wailed one senior loans banker discussing an increase in enquiries from European borrowers about funding through bilateral facilities rather syndicated loans.
With corporate borrowers looking to take advantage of the pricing differential emerging across the region, and hoping to avoid ever more strident demands for ancillary business, many over the last six to nine months have looked to set up one-on-one loans rather than put a group of lenders in place. Could this be another marker that the syndicated loans product is on its way out?
Certainly some of the vital signs are not looking positive. According to data provider Dealogic, volumes in EMEA have fallen 57% year on year and are now at their lowest level in 18 years. Even where there are transactions, they are not providing the syndication activity that banks’ balance sheets crave. Borrowers are increasingly executing self-arranged club deals, meaning that many lenders’ syndication departments have become little more than the post-rooms through which refinancings are channelled.
But if the syndicated loans market as we have known has gone for good, it is only because it is evolving into a new, stronger animal. In the new regulatory environment, a stable, flexible and increasingly transferable financing solution should be welcomed by lenders and borrowers alike.
And although the capital markets may well become corporates’ first point of call for drawn financing, no other product can beat loans’ efficiency and privacy when looking for acquisition or event-driven funding.
Lenders recognise that their role is to provide the most efficient financing for their client, and that the loans product often has the flexibility to supply that financing — whether it is through bilateral facilities or syndicated deals. Those claiming the end is nigh for syndicated loans may be left waiting for a few more years yet.