A SUPPLEMENT TO EUROMONEY - MARKETS 1997Re-engineering the loan business Barring a major credit event, it looks as if syndicated loan spreads are likely to stay at current levels for the rest of 1997. The market is still awash with liquidity and, especially in the aaa and aa categories, this should keep it very much a borrowers' market. The latest France Telecom deal is a good illustration of that, with terms reminiscent of the late 1980s. As is normal at this stage of the credit cycle, the spread compression between the AAA/AA and the weaker BBB investment grade credits has been appreciable. This has been particularly acute in central and former Eastern Europe, as exemplified by Hungary. Though the country achieved investment grade rating and OECD status, prices have come down from between 125bp and 150bp to nearer 30bp. After the record low set by the Hungarian telecoms company, Matav, there was even an attempt by Sumitomo on the recent Hungarian oil company, MOL, transaction to get below 30bp. "That clearly didn't quite work," says Simon Hood, executive director of credit syndication at SBC Warburg. "It was obviously felt that pricing had gone one step too far. |