Lender control slipping

Author: | Published: 1 Jul 2009

In the years leading up to the credit crunch, the European leveraged finance market saw a surge in liquidity and jumbo deals. This led to fierce competition between lenders which, together with the use of sponsor precedents, resulted in increasingly borrower friendly leveraged terms. The need to accommodate institutional investors meant further amendments to structure, terms and voting.

The credit crunch was seen as an opportunity to rebalance in favour of lenders. However, the continuing (albeit decreasing) supply of quality deals and a perception that any slowdown may last only 12 months meant that leveraged terms were amended only to the extent considered absolutely necessary to assist syndication. And even now, with the market screeching to a halt late last year, banks are conscious that the pendulum may reverse with the much-anticipated green shoots of recovery.

Change in banking model The lack of liquidity has led to an increase in club...