July/August 2010

FinalCut: Loan Market Buzzing Again, Article Says

ABF Journal illustrator, Jerry Gonzalez’ visual interpretation of a top-ranked abfjournal.com news story according to our visitors.



FinalCut_BizzyBees

An article on CFO.com by staff writer Vincent Ryan noted that a Standard & Poor’s report showed new institutional loan issuance reaching $19.2 billion in April of this year — an increase from March issuance of $14.2 billion and the highest since October 2007. The substantial increase indicates that the “Deals Wanted” sign in on the door of the institutional loan market and underscores the large amounts of capital sought by companies and private equity sponsors.

In addition, S&P’s Loan Syndication and Trading Association Index, which represents about 95% of the institutional market for bank debt increased significantly. Ryan noted the average price of loans was up in the low 90s, whereas the average price in December was in the 60-plus range. Another dynamic contributing to loan demand is the rate of loan repayment, which registered at the $12 billion mark in April.

Still with the collateralized loan obligation (CLO) issuance at a virtual standstill, the funds flowing into the institutional loan market are rather anemic when compared 2006, when CLOs accounted for $97 billion of corporate loan issuance. Also, looming financial regulations could serve to curb future loan activity as could volatility in sovereign debt in the interim. So-called risk retention regulations in pending legislation could reduce the number of lenders with the capacity to issue and participate in the syndicated loan market.