The past year in the loan market has been marked by unprecedented volatility, sparked mainly by the Enron, Worldcom, Global Crossing and Adelphia blow-ups. The bumpy ride is settling a bit, but panelists in the "Shock Therapy" session said there is still a way to go before all is well in the corporate loan market. "Next year will be just as volatile in the leveraged market," said Ted Swimmer, managing director at Wachovia Securities. Unfortunately, no one disagreed.
The presenting group's slide show noted that the four corporate debacles were "as big a market moving shock as 9/11." Panelists noted that the leveraged market's volatility is further attributed to increased benchmarking to other markets. Things won't settle down in the primary market until there is increased liquidity in the equity, high-yield and secondary markets, statedJenny Lee, v.p., loan capital markets at J.P. Morgan.
Panelists noted that another step to stabilization is getting pro-rata spreads higher and more in line with institutional pieces. "On the leveraged side, [market players] haven't done enough. We'd like to see more on the revolver and pro rata," Lee said, explaining that pro rata pricing should be increased. She also noted the frequent absence of the "A" term loan in the present market. Swimmer commented that "B" term loans are being structured as a hybrid of the term loan "A."
