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Syndicated loans: Big banks learn to flex their muscles

With jumbo syndicated loans generating large fees - $600 million for Olivetti's deal alone - syndicated lending is suddenly a big revenue earner for investment banks. But how much old-fashioned lending business is there left for the market's smaller players? Jack Dyson reports.

It's going to be a great year for the giants of the syndicated-loan market. Jumbo deals for Olivetti, Vodafone, Emap and Mannesmann have proved the value of loans in acquisition finance and cemented the position of the very largest players. But the news is not so good for the middle tier. In the first quarter of this year, the volume of loans in the $250 million to $1 billion range was down in both absolute terms and in the number of transactions done.

Chris Elliott, head of syndications at Royal Bank of Scotland, says: "If you take all of the M&A deals away, the immediate question is what has happened to all of the general corporate purposes loans? If the merger deals dropped away there would be nothing going on." Leveraged deals and project finance have both been fairly buoyant recently but there will be very little general corporate borrowing until after the millennium. Elliott adds wryly: "It is as if the banks are being kept afloat by the merger mania. We must bless our Olivettis!"

Fewer deals do not mean that syndication teams are not busy. Far from it, says Richard Munn, director of loan syndications at Deutsche Bank.

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