As the disruptions of the last 18 months fade further into memory, the loan market has experienced a resurgence as a viable solution for companies seeking capital for stability and growth.
Syndicating your bank credit facility can enhance your access to liquidity so that you can deal with day-to-day challenges and opportunities more effectively while supporting specific growth initiatives that you may have in mind for the long term.
Smart Business spoke with Cathleen Walker, managing director in PNC’s Debt Capital Markets, about where the market has been, where it is now and how you can seize the moment to improve your competitive position.
What are some of the basic benefits of syndications?
By working with a group of banks, a syndication can mitigate the risks that might arise when you are dealing with only one bank in a volatile market.
It can also deliver capital with more competitive market terms.
How has the market changed in the last 18 months?
At the beginning of 2009, the loan market was desperately looking for a bottom. Both leveraged and investment-grade borrowers felt the impact of weakened credit profiles and consolidation of lenders as well as tightening lending standards.
These conditions led to an unprecedented decline in syndicated loan volume. According to figures from the Federal Reserve and Loan Pricing Corporation, commercial and industrial loans fell from a high point of $1.64 trillion in October 2008, to $1.25 trillion by March 2010.
One year later, there has been some recovery and stabilization in the capital markets. First quarter 2010 loan issuance has increased 36 percent over the same quarter last year. Although credit spreads remain high by historic standards, they have narrowed considerably. Further, corporate credit quality is improving, lenders are anxious to lend to quality borrowers and, as a result, we have begun to see tenors being extended and event-driven underwritings beginning to return.
Furthermore, lenders that appeared to have exited the market 12 to 18 months ago have re-emerged and are looking for assets.
