LMA Polls Members on Outlook for Syndicated Loan Market

The Loan Market Association (LMA) has published the results of a survey of its members on the outlook for the syndicated loan market over the next 12 months.

The LMA said that responses were collected anonymously, representing the views of more than 580 individuals from over 30 countries, actively working in the loan market. The survey comprised multiple choice questions covering both the primary and secondary loan markets, as well as the key issue of regulation. 

The results, and the LMA’s commentary, were as follows:

Question one: Which topic do you think will most influence the syndicated loan market over the next 12 months?

  • Regulatory requirements – 30.4%
  • Effects of the eurozone crisis – 29.0%
  • Funding costs of banks – 22.8%
  • Competitive pressure in the market – 13.5%
  • Yield expectations of investors – 4.3%

“With Basel III likely to come into legislative force within the next 12 months, at least in the eurozone, it is not surprising that 30.4% of respondents believe that regulation will have the largest influence on the syndicated loan market. The continuing eurozone crisis, close behind at 29%, just compounds the feeling of uncertainty.”

Question two: Next year, where do you think the best opportunities will lie?

  • Restructurings – 28.9%
  • Large refinancings – 23.5%
  • Emerging markets – 22.4%
  • Corporate mergers and acquisitions (M&As) – 15.4%
  • Leveraged loan market – 9.8%

“Given the above-noted uncertainty surrounding the eurozone, it is to be expected  that corporate M&A will not figure strongly in the short-term. Restructuring, at 28.9%, shows that many still perceive that we are not yet out of the crisis and that it could get worse before it gets better. Encouragingly, 22.4% believe opportunities will arise in the emerging markets, and the LMA’s recent initiative to launch a developing market loan agreement looks timely.”

Question three: What are your volume expectations for the next 12 months in the Europe, Middle East and Africa (EMEA) primary syndicated loan market?

  • Rather unchanged – 47.8%
  • Increase by more than 10% – 27.7%
  • Decrease by more than 10% – 15.8%
  • Increase by more than 25% – 6.5%
  • Decrease by more than 25% – 2.2%

“Volumes for 2012 to date are relatively weak and 47.8% of the respondents expect this situation to remain unchanged in 2013, which is hardly surprising given the persisting shortage of M&A and other financing opportunities.”

Question four: What is the main reason for settlement delays in the current market?

  • Lack of pre-trade diligence (by buyers/sellers) – 34.3%
  • Agent-related issues – 27.7%
  • Know Your Customer (KYC) issues – 23.3%
  • Short selling and/or traders’ position management – 17.7%

“Thirty-four point three percent of respondents see lack of pre-trade diligence by buyers and/or sellers as the main reason for settlement delays in the current market. While agent bank and KYC issues, and obviously traders’ book management, lie outside the gift of counterparties to control, addressing pre-trade diligence generally does not. There is clearly a body of opinion which suggests settlement times could be brought down if pre-trade diligence was afforded greater focus.”

Question five: To what extent do you think the proposed regulatory changes will impact on your business?

  • Quite significantly – 47.5%
  • Moderately – 25.9%
  • Materially – 21.2%
  • Not much – 5.4%

“Sixty-eight point seven percent believe that the regulatory proposals will impact on them quite significantly or more. Certainly banks and non-banks will be affected and this shows consistency with the response to question one.”


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