Part 2: The influence of credit derivatives on syndicated loans

28th May 2007

The value of the global credit derivatives market has increased massively over the last few years, to $26,000 bn in July 2006, according to ISDA. This development is one of the factors which has created the currently friendly climate for Borrowers in the UK. Along with low interest rates, the growth in the appetite of CLOs and hedge funds, and the development of the secondary loan markets, the hedging and arbitrage capabilities of credit derivatives have fuelled an increasingly Borrower-friendly market, especially in the leveraged sector. There has been extensive press coverage of the ease with which it is currently possible to raise substantial amounts of syndicated debt with tight pricing and loose covenants.