European providers of leveraged loans will need to become more aggressive and flexible if they want the stem the tide of European borrowers going to U.S. lenders and European high-yield bond markets for capital. "If the US loan market can do something, it does beg the question why the European loan market can't do it as well," a syndicate head said. "Right now companies are prepared to go to the US rather than the European market, which is their natural home."
The Financial Stability Oversight Council voted to go ahead with its first round of designating companies as "systemically important," an action that subjects them to closer regulatory scrutiny than they would otherwise receive. Spokesmen for American International Group, GE Capital and Prudential Financial confirmed that they were included in the first group. Companies given the designation have 30 days during which they can challenge the action.
Growth is still sluggish and austerity measures are still taking their toll, but European companies are finding it easier to obtain credit financing than they did during the financial crisis. Getting financing from banks remains a challenge, companies say.
A hoped-for revival of the European market for collateralized loan obligations, loans and other debt instruments bundled into securities, could be cut off before it begins due to proposed new credit market rules. Some asset managers are worried that a requirement that they hold a fixed 5% stake in their offerings will make it difficult to complete many deals because they are thinly capitalized.