Syndicated lending volume continued to grow explosively in the third quarter, largely on the strength of a surge in merger and acquisition activity.
The volume of syndicated bank loans reached $203.3 billion, breaking a record of $164.1 billion set in the previous quarter, according to Loan Pricing Corp. a New York financial data publishing company. Volume was up from $81.9 billion in the third quarter of 1993, Loan Pricing said.
Experts said that the growth attested to healthy demand for credit on the part of large corporations, as well as the eagerness of banks to participate in loans. But they also cautioned that growth already may be slowing as banks begin to focus more intently on credit quality and become more selective.
Chemical Banking Corp. again was the top syndicator of commercial loans, acting as agent bank in 85 deals for $50.7 billion. Among the Chemical-led deals was the financing for American Home Products Corp.'s $10 billion takeover of American Cyanamid Co., the biggest merger loan in years, and a $5 billion refinancing for Time Warner Inc.
The strong flow of new loans -- in addition to the refinancing of existing lines that has constituted the lion's share of the market in recent quarters -- helped moderate the. downward pressure on pricing, said Steve Miller, a vice president of Loan Pricing.
"The market is quite strong for those transactions, with strong credit and pricing characteristics," said James Lee, senior managing director and head of structured finance at Chemical.
Chemical acted as agent or coagent in 117 deals worth $82.4 billion. Citicorp was a close second, acting as agent or coagent in 94 deals for $76.3 billion.
Chemical's dominance was more pronounced in the ranking of agents only. The bank led loans that made up 22% of the total syndicated loan volume. Citicorp ranked second in the agents-only list, with 65 deals for $32.1 billion, or 14% of the volume.
J.P. Morgan & Co. ranked third as an agent bank to 33 deals totaling $24.8 billion. BankAmerica was third on the list of banks acting as agent or coagent, with 91 deals for $74.4 billion.
Chemical officials said their loans were well received in the marketplace.
"We have refused to compromise on credit and underwriting standards, and that has served us well in what is becoming a more selective market," Mr. Lee said.
The American Home deal, announced in August, was initially a hostile offer of about $9 billion, but the deal was increased to $10 billion when American Cyanamid agreed to a higher offer.
The loan was syndicated by early September to about 65 banks. Chemical, which committed for up to $1.2 billion, wound up taking about $300 million of the credit, according to bankers familiar with the deal.
In another merger financing, Chemical and Citibank led a $2.8 billion credit for the merger of Federated Department Stores with R.H. Macy & Co.
Chemical also was the lead bank in a $1.2 billion credit for Goodyear Tire and Rubber Co.
The new credit consolidated Goodyear's existing, self-arranged facilities into one smaller credit, reflecting the tire maker's ongoing debt-reduction program.
Not included in the $203.3 billion of loan volume was an $18 billion refinancing for General Motors Acceptance Corp, which was essentially a marking to market of a loan arranged for the automaker a year earlier.
Mr. Miller explained that Loan Pricing does include deals in which the terms of an old loan are merely amended.
The refinancing at more favorable terms reflected market conditions and the strength of the borrower.
Also during the quarter but not included in Loan Pricing's U.S. loan volume statistics was a 6 billion Ecu (or $7.5 billion) credit for the Kingdom of Spain.
That deal was seen as a signal of Chemical's intent to become more active in the arranging sovereign credits. Citicorp and J.P. Morgan are considered to be among the leaders in this area.
Other big loans launched in the quarter were a $3.5 billion credit for Kmart by BankAmerica Corp. and Bankers Trust New York Corp., and a $1.2 billion credit for Caterpillar Inc. led by Citicorp.
Bankers Trust led an $800 million credit for Eastman Chemical. First Chicago Corp. and Chase Manhattan syndicated a $3 billion credit for ConAgra.
[Tabular Data Omitted]
