Firms shunning syndicated loan offer for bonds

Michael Bow
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UK businesses’ use of syndicated loans has plunged to the lowest levels since 2009, as more and more firms use corporate bond markets to access financing, figures out yesterday show.

Syndicated loan volumes for UK corporate borrowers, which measures money lent by a group of lenders to one borrower, now stands at $45.3bn (£28.5bn) for the current year ­– a 59 per cent drop versus the same period last year and its lowest level since 2009.

The drought in syndicated loans has been replaced by the use of corporate bonds, with volumes standing at a record $86.9bn for the current year, up 67 per cent compared to the same 2011 period.

The figures, published by Dealogic, shows the refinancing of syndicated loans comprises a large part of the volumes, some 69 per cent.

This is the largest percentage since 1994.

Loan Market Association director Nick Voisey told City A.M.: “Given the lack of corporate M&A activity and general level of uncertainty in the global economy it’s not surprising, as one of the main uses of syndicated loans is the financing of corporate acquisitions.

“However, the fundamental strengths of the product remain, for example its flexibility in providing working capital facilities for corporates.”

The data reveals that despite the drop in volumes there were still large deals on the table, with BG Energy and Tullow Oil signing up to loan facilities that both surpassed the $3bn mark.

Lloyds Banking Group was the dominant bookrunner for corporate loans with a ten per cent market share.