Loan syndication gaining in strength in an uncertain world

The vibrant attendance of the EBRD’s 13th Annual Syndications and Co-financiers Meeting, with more than 120 participants representing 70 institutions in attendance,  reveals new buoyancy in the loan syndications market, albeit with fewer actors. 

The meeting has become a fixture in the Bank’s annual event’s calendar and aims to present an overview of the current state of the syndications market. At the same time, it provides bankers and industry experts with a platform to discuss openly broader issues affecting the Bank’s region and the global economy in general.

“The meeting is all about partnership,” said Lorenz Jorgensen, the Bank’s Director for Loan Syndications. “It is a very valuable event for us, as it enables us to have very open discussions with partner banks and institutions.”

Increased interest

In 2010, the EBRD attracted co-financing for 115 projects throughout 29 countries for a total of €5.86 billion. The portfolio included a broad mix of sectors and countries ranging from the modernisation of Pulkovo airport, the first public-private partnership project in the Russian airport sector, to a loan to car producer Ford Otosan in Turkey.

During the financial crisis, commercial banks significantly reduced their co-financing activities in emerging markets and this was no different in the Bank’s countries of operations, Mr Jorgensen explained. However, since 2010, commercial lenders have become more active again in the EBRD region, although with fewer actors in the market.

This applies in particular to the financial and banking sector where interest picked up more substantially, other panelists noted.  “We see more and more syndicated loans in the sector again,” said Günther Lindenlaub, Head of Credit Markets at Raiffeisen Bank International.

With view to the outlook for 2011, Mr Jorgensen explained that while there are reasons for optimism, many challenges remain:   

“The threats of inflation, rising interest rates, shocks to global GDP through oil prices, and the as yet unknown impacts of the Basel III capital and liquidity requirements, mean that the loan markets are nervous and fragile, despite the tightening of spreads and loosening of covenants at the top of the credit curve.”

A varied programme

The meeting’s programme also included various panels and speeches discussing other Bank-specific and general topics, such as the EBRD’s investment priorities and the global business environment. More specialised presentations focused on the EBRD’s local currency and capital markets initiative, the Bank’s activities in the manufacturing and services sectors or its potential role in providing food security, as well as a panel to showcase the forthcoming huge Oyu Tolgoi copper and gold mining project in Mongolia – a project which exemplifies the need for partnership among many parties to achieve what no single party can achieve alone.

The EBRD’s President Thomas Mirow pointed out that the EBRD region has returned to growth. At the same time, he stressed the need for the Bank’s countries of operations to respond to various important challenges, such as introducing new regulatory and supervisory regimes, improving the general business environment and diversifying the region’s economies, in particular in the case of resource-rich countries.

On the topic of food security, the Bank’s Director for Agribusiness Gilles Mettetal pointed to the world’s rising population, rising and changing food demands as well as more unpredictable and extreme weather patterns. “Russia, Ukraine and Kazakhstan could produce 60 per cent of the world’s wheat demand,” Gilles stressed.

MENA in mind

Discussions were often inspired by the recent political turmoil in the Middle East and North Africa. For example, the panelists of the economic and political panel debated the potential impact on the oil price as well as the impact on other geographical regions and global economic growth.

Jonathan Charles, the Bank’s new director of Communications, spoke about his experience as BBC correspondent with revolutions and his perceptions of change in Central and Eastern Europe.

He reminded the audience that transition can sometimes be "a bumpy road", but one on which countries will advance steadily over time, as well as urging the audience to remember that revolutions require great patience and will always be “messy”, something to “bear in mind as events in North Africa unfold.”

The final word belonged to Lorenz Jorgensen, who summarised the 13th Annual Syndications and Co-financiers Meeting as being “held against a backdrop of uncertainties caused by increased political risks, oil and food price increases, Basel III liquidity and capital requirements.

"This year’s meeting proved how valuable the role of the EBRD is in leading the way, to be a 'first mover', and to inspire confidence for others to work alongside us. The strong attendance showed how important and relevant the EBRD is in the current environment.”

Last updated 11 March 2011