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Corporate acquisitions and leveraged buy-outs have propelled the trillion-dollar syndicated loans market to record levels as companies take advantage of cheap debt and strong liquidity across the globe.

Syndicated lending so far this year has hit $3,337bn compared with $3,079bn for the same period in 2005, an increase of 8 per cent, according to Dealogic, the data
provider.

This figure – which includes both investment grade and leveraged finance – is nearly twice the value for the same period in 2003, when the market began to take off.

Richard Howell, co-head of leveraged finance in Europe at Lehman Brothers, said: “Leveraged buy-outs and corporate-to-corporate mergers and acquisitions, plus new areas of finance such as infrastructure, are driving syndicated loans in a benign credit market where companies and sponsors can borrow on very attractive terms.”

Dealogic also found that syndicated lending had risen sharply in the emerging markets of the Middle East, Africa, south-east Asia and the Caribbean.

The Middle East, which is thriving on the back of the oil-related boom, has seen syndicated lending jump by 59 per cent so far this year compared with the same period in 2005. Overall volumes now stand at $58bn.

“Middle Eastern groups are active acquirers of European assets. There is also increasing private equity activity in eastern Europe,” Mr Howell said.

In south-east Asia syndicated lending rose by 64 per cent this year compared with the same period in 2005 to stand at $34bn. In Africa syndicated lending rose by 42 per cent to stand at $22bn, while in the Caribbean the rise was a massive 94 per cent, although this was from a low base, to stand at $7bn.

The only region where the volume of syndicated loans has fallen is Europe, which saw a 9 per cent decrease to $1,116bn this year. This is because of the large amount of investment-grade refinancing in 2005, which buoyed last year’s numbers. However, analysts stress that private equity-driven leveraged loans have increased dramatically this year.

In North America, Dealogic said syndicated lending had risen by 19 per cent so far this year compared with the same period in 2005 to stand at $1,723bn, while it has climbed by 10 per cent in Japan to stand at $168bn so far this year.

Copyright The Financial Times Limited 2017. All rights reserved.
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