U.S. syndicated lending volume is ending 2016 at the same pace as 2015 thanks to a pickup of corporate buyouts and refinancing during the fourth quarter.
According to a report by Reuters, companies engaged in more buyout activity at the end of the year as the victory of Donald Trump to become the nation’s 45th president has boosted expectations of less financial regulations once he takes office on Jan. 20. That has led to a surge in the stock market, in addition to the accelerated pace of buyouts and refinancing.
Reuters noted the more business-friendly policies expected out of the Trump administration increased leveraged buyout (LBO) and merger and acquisition transactions in the last weeks of the year, with bankers telling Reuters more of the same is coming in 2017. The report noted 2016 will end with syndicated lending reaching $1.99 trillion, equal to the volume last year. In 2015, lending as a total declined 6 percent compared with 2014, hurt by decreasing oil prices, uncertainty around what the Federal Reserve would do with interest rates and a preference for less risky markets.
With the Federal Reserve moving to raise interest rates in December and signaling there are three more rate increases coming in 2017, analysts and investors told Reuters that buying loans that are tied to rates that will be increasing during the year makes sense.
“In the LBO space, 2017 will be, if not a record year, a top two or three year,” said Brendan Dillon, co-head of global leveraged finance at UBS, in the report. “There’s a lot of pent-up deal flow.”
Dillion went on to note that, with the incoming administration, “there will be a realignment of winners and losers in certain sectors and that will create a lot of LBO activity.”