Academic journal article ABA Banking Journal

Yellow Light for Loan Syndications

Academic journal article ABA Banking Journal

Yellow Light for Loan Syndications

Article excerpt

The volume of syndicated commercial loans jumped by 71% in 1994, according to a recent briefing paper from ABA's Office of the Chief Economist. At yearend outstanding syndicated loans reached $665 billion, with the participation of institutional investors and insurance companies adding to the growth. Banks, however, continue to be the dominant syndicators by far.

A notable factor in the 1994 growth was syndicated lending for mergers and acquisitions, ABA reported, with $81 billion being syndicated for this purpose in 1994, versus $28 billion the year before.

ABA traced the reinvigoration of syndicated lending to a lenders' market with strong pricing and good risk/return profiles in 1992.

"By 1994," ABA wrote, "competition in the market had increased, causing a substantial decline in the pricing structure. To compensate for the decline in prices, loan syndicators attempted to maintain income by increasing volume. This led to an increase in the level of risk per dollar return for many new syndicated loans."

ABA observed that the risk/return profile on syndicated loans "is better than that which existed at the end of the 1980s. Portfolio management strategies adopted by banks limit loss exposure from a single borrower by reducing the level of concentration. k is not uncommon, today, to find a loan syndication deal for as little as $100 million with four or five banks acting as co-agents."

New ratings for syndicated loans unveiled

The first rating scale designed especially for syndicated bank loans has been introduced by Standard and Poor's Corporate Finance Ratings Services after a year's development. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed


An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.