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Barclays Leads US Debt Push by Europe’s Banks

Barclays Leads US Debt Push by Europe’s Banks

(16 July 2018 - United Kingdom) European lenders are becoming more active in US debt markets, financing billions of dollars in borrowings for riskier American clients to provide relief for revenue weakness in other divisions.

Increased competition may be enabling companies to borrow more than they should and on increasingly loose terms. When an indebted infant health-care company in Atlanta wanted to borrow hundreds of millions of dollars to buy a rival in Pasadena, it turned to Barclays Plc instead of a domestic US Bank. Barclays is helping Aveanna Healthcare LLC source a US$221 million loan for its purchase of Premier Healthcare Services LLC, adding to an existing US$900 million facility established in 2017. The Aveanna deal is a reflection of the rapidly expanding US leveraged loan market, which lenders arrange for highly indebted corporations often to fund mergers and acquisitions or support dividend payments to private equity investors.

Banks and other firms structured US$494 billion of new debts in 2017, the most since in the last eight years. After a strong H1 2018 Europe’s biggest lenders are actively targeting US corporates rising borrowing appetite. Eight banks from the EU arranged US$62 billion of new US leveraged loans in the six months to June 2018, compared with US$53 billion in H1 2017. This figure increases European lender’s combined market share to almost 24 percent according to data compiled by Bloomberg. The figures include revolving lines of credit that are often part of such deals but exclude refinancing of existing debt. The Europeans are led by Barclays, where Chief Executive Officer Jes Staley has targeted leveraged finance as an area for growth since taking charge in 2015. The UK bank, which bought Lehman Brothers US operations after the GFC in 2008, has over six percent of the market for new loans and is on track to be the third-biggest arranger this year. That would be its highest ranking since 2014. Heavily-indebted companies may struggle to cope as the Federal Reserve hikes interest rates, which could trigger a recession.

“Barclays operates in compliance with the rigorous leverage finance guidance provided by the regulators. In addition, we have a thorough internal credit risk process and we always ensure that we allocate our balance sheet to drive the best outcomes for both our clients and our shareholders.” said Jon Laycock, a Barclays spokesperson. “We’ve seen documentation standards deteriorating and leverage levels increasing. We also view the appearance of some new entrants in the arena as a warning signal. Therefore we have imposed a cap on overall leveraged exposure.”  Said Raymond Vermeulen, a spokesman for Amsterdam-based lender ING.

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