Cruzan Stresses Risk Management
Managing risk is the name of the game in the syndicated loan market these days and "B" loans have helped minimize losses and increase liquidity, according to Marsha Cruzan, managing director and head of syndications origination at Banc One Capital Markets. "The loan market does remain fundamentally healthy," she said in the conferences opening remarks. However, "Deals are clearly more difficult to syndicate than one or two years ago." Cruzan explained that "B" loans are on the rise with 29 so far this quarter with a spread averaging 479 basis points over LIBOR, 25 basis points higher than this quarter last year. She further noted that even utility lenders are getting attractive returns, with "collateral you can actually kick with your feet."
Cruzan spoke to the investment-grade lending environment by acknowledging that pricing is below acceptable levels. Credit deterioration is another factor, with gradual and predictable declines generating adversely rated credits, she said. But large deals are getting done, she noted, citing the success of General Electric's $18 billion deal, which was upsized from $15 billion. She also made note of issuers' negotiation pressures when their backs are not up against the walls.