European financial firms see re-financings as best business opportunity

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The London-based Loan Market Association (LMA), established nearly 20 years ago, has gauged the opinion of members for prospects over the next year.

The LMA, which has increased membership to over 625 organisations such as commercial and investment banks, institutional investors, law firms, service providers and rating agencies, aims to improve liquidity, efficiency and transparency in the primary and secondary syndicated loan markets in Europe, the Middle East and Africa (EMEA).

The Association held its ninth annual conference earlier this week, attended by over 900 delegates, which covered topics that included the primary and secondary loan markets, opportunities in the developing markets, what makes a good borrower/lender relationship, the growing private placement market and the future of the restructuring market.

Audience straw polls included the issue of best prospects for next year, with 39% of respondents agreeing that re-financings will provide the best business opportunity, while 26% of respondents voted for corporate mergers and acquisitions (M&A). Four in 10 respondents believe the economic situation in Europe, China or in other emerging markets (Ems) will be the factor that drives the syndicated loan market over the next 12 months.

When voting on other issues, 45% of respondents said they expected non-collateralised loan obligation (CLO) funds to represent the most influential investor type in leverage loans in three years’ time, while 74% saw the Middle East as providing the best loan opportunities in the developing markets in the next 12 months.

Fifty-eight per cent of respondents felt the current way of doing business through relationship lending is sustainable only in the shorter term (one to five years), given the increasing regulatory cost of capital; 44% agreed that an unfragmented recognisable European private placement market will emerge in two to five years’ time, while 51% believe know-your-customer (KYC) requirements is the main cause of secondary settlement delays in Europe.

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