Reuters: Private Equity: RLPC-EMEA syndicated loans hit 10-year low in Q1

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RLPC-EMEA syndicated loans hit 10-year low in Q1 Mar 28th 2012, 18:03 By Tessa Walsh LONDON, March 28 | Wed Mar 28, 2012 2:03pm EDT LONDON, March 28 (Reuters) - Syndicated lending in Europe, the Middle East and Africa hit a 10-year low of $115.5 billion in the first quarter of 2012 as banks shrank their balance sheets and companies remained wary of debt, according to Thomson Reuters LPC data. Preliminary numbers released before Friday's quarter-end show lending tumbling 51 percent from a year earlier to 2002 levels, the data shows. The implications of the drop in volume for banks' revenue and headcount are not positive if low levels of activity persist, bankers say. Any impact on profitability could start to show up in banks' first quarter results, which will be released across Europe in late April and May. The anticipated hit to income may, however, be mitigated, because although banks are lending less, they are charging higher fees. Only 168 loans were completed in the first quarter, which is 50 percent lower than the 340 loans completed in the first three months of 2011, a n d is the lowest first-quarter deal count since 1996. Low volume in the first three months was due to a combination of factors including a sharp burst of bank deleveraging in the fourth quarter. Banks sold loans and lent less to conserve capital to hit mid 2012 targets. Banks advised clients to refinance in late 2011 before an anticipated rise in loan pricing, which accelerated refinancings and created a deal hole in early 2012. Cash-rich companies were reluctant to raise new loans from increasingly unpredictable banks, and instead turned to the bond market for reliable longer-term financing. The European Central Bank's dual cash injection via its Long-Term Repurchase facility (LTRO) in December 2011 and February 2012 helped to ease the market but came too late to rescue first quarter loan volume. Banks had money to lend, but demand for loans particularly for M&A financing, stayed low. ABB was one of a handful of companies to raise M&A financing with a $4 billion bridge loan to back its purchase of US electrical components maker Thomas & Betts. Dealflow remains thin going into the second quarter with only $33 billion of investment-grade loans in the pipeline, compared to $46.5 billion a year earlier, according to LPC data. The picture in the leveraged loan market is slightly more positive with $3.7 billion of loans in the pipeline in late March, compared to $3 billion a year earlier. (Reporting by Tessa Walsh; Editing by Andrew Callus) Link this Share this Digg this Email Reprints

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