LONDON (Reuters) – Specialised debt and hedge funds are the lenders for up to half of the leveraged loans syndicated in Europe, Close Brothers said, which questioned how the funds would behave if borrowers were to run into trouble.
Banks are the traditional lenders in the leveraged loan market, which provides funding for private equity buyouts and to companies with low credit ratings.
But banks are increasingly focused on arranging and distributing the loans, the corporate finance house said on Monday. Thus they retain a much lower direct economic interest.
The European leveraged loan market has grown sharply in recent years, and individual private equity deals have also become bigger, with the $12 billion (6.3 billion pound) buyout of Danish telecoms firm TDC (TDC.CO: Quote, Profile, Research) setting a record late in 2005.
