Syndicated Scoop: Sharp Decline in C&I Lending, Trump Credited for Uptick in Cross-Border M&A and More
13 April 2017
Intralinks for Financial Services—Syndicated Scoop is a newsletter providing a recap of the month’s top stories and insightful commentary related to the commercial and syndicated lending industry.
In this month’s Syndicated Scoop...
- C&I lending declines due to supply-demand dynamics
- Cross-border M&A showing the strongest start since 2007
- Jevic case garnering more attention in the world of credit lending
Loan Market: You Ain't Seen Nothing Yet?
The Loan Syndications and Trading Association (LSTA) recently provided an analysis of the sharp decline in the Fed’s Commercial and Industrial (C&I) lending stats, saying that it is an issue of supply-demand dynamics rather than a lack of lender interest. According to the LSTA, The limited new supply [of new issuance] – overwhelmed by demand from loan mutual funds and reviving CLOs – has led to the usual agony of flexing deals and falling yields. The LSTA warns that if the supply-demand dynamic does not change, the coming quarters could see even more painful repricings as there are over US$300 billion of loans whose call premiums are expiring in the coming quarters.
Trump Helps Make Cross-Border M&A Great Again
Reuters reports that cross-border M&A had its strongest start since 2007 – driving first-quarter global volumes up seven percent, a credit they give to U.S. President Donald Trump, whose economic agenda fueled optimism and buoyed the stock market and the U.S. dollar. As a result, foreign acquisitions became cheaper than similar U.S. targets. Though many potential U.S. targets feel they deserve high valuations, uncertainty over Trump’s tax policies makes planning a domestic U.S. merger more difficult and risky for the parties involved. The biggest deal so far in 2017 involved U.S. healthcare and consumer giant Johnson & Johnson’s US$30 billion acquisition of the Swiss biotechnology firm Actelion Ltd.
Jevic: Supreme Court Dismisses Priority-Skipping in Structural Bankruptcy Exits
The Jevic case has garnered a lot of attention in the world of credit lending because it throws into question the future use of bankruptcy cases, and has implications for lenders, according to an analysis by Kramer Levin Naftalis & Frankel’s Corporate Restructuring and Banking Group. In the case of Jevic, Corporate Counsel reports that, “The U.S. Supreme Court held that ‘structured dismissals’ of bankruptcy cases cannot distribute estate assets to certain creditors in derogation of the Bankruptcy Code’s priority rules.” In this case, the U.S. Supreme Court made a statement about the importance of the absolute priority rule upon which the entire U.S. bankruptcy laws rest and secured lenders rely. The court would not permit a deviation from those priority principles outside of Chapters 7 or 11 in the context of a final distribution through a structured dismissal. The court did, however, recognize the importance of flexibility in the course of a bankruptcy case and specifically approved payments to critical vendors and others. Moving forward, analysts posit that negotiations through the structured dismissals process might be harder and more expensive, but may not be impossible. Read more on this from the LSTA.
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