Part 1: Non-bank Lenders: current issues and opportunities for Borrowers

28th May 2007

The climate for raising syndicated debt in the UK is currently more favourable to Borrowers, especially in the leveraged market, than at any time over the last 10 years. Factors include low interest rates, the growth in the appetite of collateralised loan obligation vehicles (“CLOs”) and hedge funds, the private equity boom, the immense growth in the secondary loan markets, the hedging and arbitrage capabilities of credit derivatives, and the development of synthetic securitisation techniques. All these have combined to bring significant benefits to Borrowers, in terms of facility size, pricing and covenants. “Covenant mulligans”, which allow a breach on a covenant testing date to be ignored unless repeated on the next, have been succeeded by the arrival from the US of so-called “covenant-lite” deals, without the tight financial controls that have traditionally typified syndicated lending.