The growing number and diversity of institutional investors in the loan market today are two central factors reflecting how the market has changed from five years ago. Investor composition has changed considerably due to the influx of collateralized debt obligations entering the buyside pool, said Peter Nolan, managing director in North American credit markets at J.P. Morgan. CDOs have surged into the loan market, comprising 26% of investors compared to just 9% in 1998, Nolan explained. The number of investors has also more than doubled with about 287 now compared to 122 in 1998, he added.
The competitive landscape for leading original bookrunners on leveraged deals has also changed. Seven of the top 10 banks in 1998 are still around, but Credit Suisse First Boston, Bank One and UBS Warburg are now in the ranks. Deal-sharing, meanwhile, has brought the banks closer together with multiple bookrunners on the rise in proportion to the number of deals. So far this year, multiple book transactions account for half of all deals greater than or equal to $250 million, whereas multiple bookrunners were on only 13% of all deals in 1998. Multiple book transaction volume also accounts for a whopping 68% of the market so far this year, compared to 8% of the volume in all of 1998.