Window Closing for Bank Deals
September 27, 1999
Although banks on either side of the Atlantic have experienced quite a different third quarter -the European loan market has been far more active than its U.S. counterpart - bankers, domestic and European, seem to agree that October will be the last busy month before the millennium.
As Y2K approaches, issuers are going to rush to market to complete their financing requirements as soon as they can.
"People want to finish things off... they want to launch and have the deals signed and closed before the end of the year," said Kevin Murray, first vice president and head of distributions at Banque Nationale de Paris in London.
Most borrowers should rush to market in October, and this trend will be particularly obvious in Europe, where a stream of merger and acquisition-related financing has been flowing steadily throughout the year.
Take for example, Linde AG's 3.6 billion euro ($3.8 billion) loan, launched earlier this month, and being arranged by Deutsche Banc Alex. Brown. The money will be used to finance the acquisition of AGA AB. Another large deal, a $2.25 billion financing for Buhrmann NV's acquisition of Corporate Express, is also now in the market.
Indeed, in Europe, especially, October is expected to be a busy month. Major European players, such as Deutsche, BNP, and ING Barings, all say that they have plenty of deals to keep them busy and will use October to complete whatever they have on the table, thereby giving the market a last push for 1999.
Once the October flurry is over, many bankers predict that the European market will cool down significantly. According to a banker at Deutsche Bank, European banks have seen fantastic transactions this year, and have made enough profits to take a breather in the last three months of this year. Banks will become more selective when it comes to choosing which new deals to finance after October, he said.
Some bankers expect the cooling down period to begin even earlier than November. "[European banks] have gone so fast in the previous months so they want to slow down," said Marguerita Pisa, assistant manager of loan syndications at Bayerische Landesbank in London. "We'd expect to start slowing down in October. By November, we'll see an even slower month."
While the European market has been robust through the quarter, activity in the U.S., by contrast, has been lackluster, some bankers said. While a few of them blame the concerns over Y2K for the stagnation, others say that a combination of a slowdown in the market that started in August, and lower overall demand have made for a slower third quarter.
Going forward, things are likely to slow down even further. Still, many domestic bankers have an optimistic outlook for October, and predict a spurt of activity before the end-of-the-year cooling down. Both Goldman, Sachs and Credit Suisse First Boston, for instance, expect to launch several deals in the coming weeks.
Also, a $3.5 billion credit facility supporting Food Lion Inc.'s purchase of Hannaford Bros. Co. that is being arranged by J.P. Morgan and a $5 billion credit facility from Chase Manhattan and CSFB supporting Metropolitan Life Co.'s acquisition of GenAmerican Corp., currently in the market, are expected to wrap within the next few weeks.