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This first edition of The Lending and Secured Finance Review comes on the heels of a strong few years for the loan markets. During this period, despite some volatility and bumps in the road, lending conditions have generally continued to improve against a backdrop of greater economic stability and the return of M&A activity in Europe and globally.
It is difficult to ignore, however, that there has been a significant change in the way corporates access funding since the financial crisis and that diversification of financing sources (both in terms of products and markets) has been a key global trend for corporate treasurers. Nonetheless, loans (secured and unsecured) remain the predominant source of funding for corporates globally. While traditional banks still play an important and active role in the loan markets and remain dominant in the investment grade market, in other sectors (particularly in the leveraged, real estate and infrastructure finance markets) institutional investors, many of whom also participate in the debt capital markets, are more prominent. The last few years have also seen the rise of alternative finance providers such as direct lending funds, particularly in the mid-market.
It is difficult to predict how the markets will fare, in particular given underlying concerns about the depth of the global economic recovery, but growth of direct lending funds, private placements and other alternatives to traditional loan finance seems set to continue. It will be interesting to see whether competition from these alternative sources and the high yield/term loan B markets will result in further cross-over of US terms into the European leveraged loan market, including the mid-market. It will also be interesting to see how banks and other investors continue to react to the changing regulatory landscape and the political and economic risks and uncertainties in certain parts of the eurozone and the emerging markets.