Lenders Predict Loan Market Boost

Bankers are optimistic that the syndicated loans market will pick up in 2011, after agreeing that the attractiveness of the bond market has impacted the loans market this year. “There is a technical imbalance and there is not enough loan demand as the bond market is so healthy,” says Chris O’Neill, svp at Bank of Tokyo Mitsubishi UFJ, adding that it is a borrower’s market. In Mexico, for example, 40 banks compete for a few top tier borrowers, creating pricing pressure not in the US, say market participants. However, LatAm is considered essential to financial institutions. Santander expects 40% of 2010 profit to come from LatAm, says Marcia Vorona, executive director of structured finance at the Spanish bank. Bankers expect to seen an increase in loan activity in oil and gas, particularly in Brazil where it is needed to fund drill ship construction, and in the petrochemicals, metals and mining. Acquisition finance in Brazil, Chile and Peru is also expected. Bankers expect tenors to grow to 3-5 years. “We can also expect to see more Asian banks, in particular from China, participating in transactions,” adds Vorona. The role of multilaterals is also expected to change. “Three years ago there were large projects that would not work without multilaterals. Now this is not the case, so I expect there to be a shift in their focus, to widening access to the global market,” says O’Neill. There is also strong demand for the transactions that do come to market. “There is really a lot of appetite and people do not want their tickets to be reduced, as there is a lack of good assets,” adds Vorona. Ernesto Meyer, head of LatAm syndicated loans at BNP Paribas, adds that international banks trying to boost LatAm exposure use syndicated loans to cross-sell other financial services, in order to catch up with local banks. Although syndicated loans may not be as cheap as the current bond market, issuers should still consider them, say lenders. “By going to the loans market borrowers will