Ashurst Global Loans UK Market Update: Markets will become (even) more domestic

The quarterly volume stats tell us that the EMEA syndicated loan markets are not as busy as in previous years. There may well be very good reasons for the lower volume numbers but surely one of them is there is a good deal less focus on registering deals than in days gone by.

The first question this prompts is; is the traditional scramble to be top of the MLA/bookrunner league table going out of fashion?

I'm not sure whether I can answer that question given I am no longer a lender but I certainly feel there is a case for saying that the markets are very different from pre-GFC days.

It got me to thinking that a better question might be - is the European loan market still a homogenous market or the sum of various parts??

As banks and other lenders have become more regional, and in some cases domestic in focus, the loan markets have followed suit. This trend is already evident and will continue as markets move into choppier waters in 2023.

Why is this ?

• There are very few truly global banks - in the last 15 years banks have refined strategies and many have become less global – even less regional – in outlook
• As banks become more selective in terms of capital allocation there will be a natural tendency to support existing relationships (more on this next week)
• Regulators' stress tests often prompt rethinks in allocation of capital – we saw this earlier this year as reports suggested that US banks temporarily cut down on weighted risk assets outside their home market to help increase capital ratios to the levels required by the Federal Reserve
• As markets contract, asset takers will be less likely to take a position in deals outside their strategic focus – both geographically and/or sector wise????
• Borrowers will themselves restructure perhaps retreating to home base/key jurisdictions offering less opportunity for ancillary business to non-domestic lenders?
• Oftentimes when economies are struggling/in recession, key domestically focused sectors/groups of borrowers will need particular focus/support from domestic banks – housebuilders in the UK post-GFC an example I was personally involved in??

So, in my view, the answer to the question above is that the European loan market is no longer an entity in itself – it is (and arguably always was) a combination of various domestic markets. Some players will remain active across borders, some deals will be cross border in nature but the next 12 months will see further focus by necessity or design.

However you look at it, Ashurst Global Loans have all the key bases covered. We have experienced lawyers in most of the key jurisdictions around Europe - you should give us a call.

We look forward to hearing from you.?