Syndicated Scoop: Life After Libor: Declines in US Credit Risk Causes Concern, and More
18 August 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...
- Regulator concerns over rise in US syndicated loan losses
- Loan market begins discussions around Libor replacement
- Euro CLO managers aren’t giving in to typical summer lull, kicking off new deals
Regulators Find “High Level” of Risk in Syndicated Loans
In the US, credit risk on syndicated loans of more than US$20m declined slightly, according to the Federal Reserve. Regulators are concerned that loan losses could rise considerably if the economic conditions continue to deteriorate. The high level of risk is mostly due to leveraged loans and loans to oil and gas companies. Bank examiners faulted leveraged loans for having loose repayment schedules and liberal underwriting.
Loan Market Contemplates Life After Libor
According to Thomson Reuters LPC: “The head of Britain’s financial markets regulator said a substitute for the London Interbank Offered Rate (Libor) must be in place by the end of 2021, presenting a challenge for companies that borrow in the US$925bn US leveraged loan market, which pegs its interest payments to the rate.” The LSTA states that if Libor were to go away, new credit agreement language would have to be written, and that industry discussions are just beginning.
Summer Lull No Obstacle for European CLO Managers
Global Capital reports that Euro CLO managers are paying “no heed” to the typical summer slowdown, churning out new offerings in August. A debut Euro deal from NY-based issuer, Brigade Capital, structured by Citi, was priced at the beginning of the month. The triple-A notes of the €368m deal were sold at 93bp over three month Euribor.
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