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Syndicated lending in EMEA tops $1trn

London, December 31, 2011

Syndicated loans to companies in Europe, the Middle East and Africa (EMEA) this year topped $1 trillion for the first time since 2007, rising 14 per cent to $1.034 trillion despite the deepening euro zone crisis, according to data.

But the market started to slow in the fourth quarter, when loan volume of $249.6 billion was 12 per cent lower than the same period of last year, said a report in our sister publication, the Gulf Daily News.

After severe market volatility in August linked to the euro zone debt crisis, banks began aggressive de-leveraging programmes and started to reduce lending and sell loan portfolios to conserve scarce capital.

This was a marked difference from the first half of the year when loan pricing continue to fall despite regulatory concerns and rising bank funding costs.

Lending was unevenly distributed around the EMEA region as the market retreated from risk and banks pulled back to home markets and prioritised lending to domestic companies.

Western European companies borrowed 15 per cent more in 2011. France was the biggest market with $207 billion of volume, followed by the UK at $173 billion and Germany at $113.6 billion.

Lending to the Middle East slumped 29 per cent to $37 billion and lending to Africa fell 18.5 per cent to $23.8 billion. Eastern European companies, however, borrowed 42 per cent more at $97.5 billion.

Financial services was the most active sector in the EMEA region with $100.6 billion of loans, followed by utilities at $98 billion.

The EMEA syndicated loan market was dominated by corporate refinancing as market volatility discouraged mergers and acquisitions (M&A) activity and lending. Companies focused instead on refinancing $753 billion of loans in 2011 - 28 per cent more than 2010 - in anticipation of deteriorating market conditions.

Refinancing drove nearly three-quarters of all EMEA volume while M&A accounted for only 11 per cent of regional lending. M&A lending dipped 3 per cent to $114.3 billion from a year earlier although activity increased in the second half of the year.

Nearly two-thirds of all M&A borrowing was by highly-rated companies as the leveraged loan market slowed in the second half. SABMiller's $12.5 billion loan, which funded its acquisition of Foster's was the largest corporate loan of 2011.

Lending to blue-chip companies climbed 16 per cent to $692 billion from 2010 - nearly five times higher than corporate bond issuance of $139.3 billion.

Nearly three-quarters of loans to highly-rated borrowers ($565.6 billion) refinanced existing debt.

Leveraged lending jumped 49 per cent to $140 billion as riskier, more indebted leveraged companies focused on amending and extending existing loans and refinancing them in the high-yield bond market when possible.

Borrowing by private equity firms more than doubled to $88.72 billion from $43.25 billion in 2010, boosted by a sharp rise in new buyouts to $44.5 billion from $25.5 billion in 2010.

The biggest new buyout of the year was the $4.3 billion loan backing the buyout of Polish mobile phone firm Polkomtel by Polish media tycoon Zygmunt Solorz-Zak.




Tags: London | Euro zone | lending | EMEA | Crisis | Syndicated loans |

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