Contributed By Winston & Strawn London LLP
There are several emerging trends in the UK banking industry.
In the UK leveraged loan market, banks have been very concerned over how the market has developed. Due to their negotiating power, sponsors have gone from negotiating terms with the arranging banks, to insisting that deals are launched with their preferred terms, leaving the buyers to push back in syndication. Sponsors have agreed flex provisions to protect the arrangers, but buyers routinely can only make a limited number of points or risk not being given an allocation. It is now rare for broadly syndicated leveraged loans to have maintenance covenants at all: last year, 88% of such loans in Europe were covenant-lite. Coupled with a spread of sponsor-designated lender counsel to all areas of the market, this has further weakened terms, with sponsors achieving extremely favourable terms and conditions.
One area of significant recent growth has been the receivables sale and ABL sector of the market. While by no means only used by companies with limited financing options, increased use of asset-backed structures by companies may indicate difficulties in obtaining finance from other sources.