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The Loan-Bond Tag Team

Jun 1, 2003

Syndicated lending has lost ground as a stand-alone business and is now part of a suite of international and local debt products offered by banks.

Syndicated lending has always been a clubby sort of business, spared the scrutiny of the public bond and equity markets. Bankers and borrowers hashed out loan terms and chipped away at basis points over tennis or a round of golf. But billions of dollars of losses in Latin America, an intensifying focus on risk management and the rise of competitive financing in local markets are redefining the once comfortable world of syndicated lending. Quantitative models, not relationships, drive credit decisions and banks have incorporated lending into a wider suite of international and local debt products.

Last year, syndicated lending to Latin American companies fell by nearly half to $22.07 billion from $40.6 billion in 2001, and the remaining active lenders have become much more selective. Today, banks only want to lend to companies with revenues in hard currency. "Right now, the driver is who the borrower is," says Arturo Girona,...

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“The crisis has been a setback for reserve diversification."

Jan Dehn, Ashmore Investment Management