In a year that produced only marginal overall growth in the syndicated loan industry, two banking companies combined to thoroughly dominate the business, splitting more than half the market between themselves.
U.S. syndicated loan volume grew to $1.05 trillion in 1999, up a mere 1.3% from $1.04 trillion in 1998, according to Thomson Financial Securities Data. But volume for the top five managers of syndicated loans grew 11%; the group structured and priced loan packages worth a total of $779 billion, up from $701 billion at yearend 1998. Chase Manhattan Corp. was nearly in a league of its own, capturing better than one of every three dollars of the overall market, with a 33.8% share. Only Bank of America Corp. came close, pulling in a 21.2% share.
In all, the top five managers in the business controlled 74% of the syndicated loan market, up from 67% at the end of 1998.
In the closely watched leveraged loan sector, the results were stronger. Overall, leveraged syndicated loan volume grew 18.8% in 1999, to $391.1 billion, from $329.1 billion at yearend 1998.
Bankers said overall volume growth was relatively flat because wider credit spreads in 1999 dissuaded many issuers from refinancing longer-term debt. Double-digit growth in the leveraged loan sector, however, partially reflects 1999's hot market for mergers and acquisitions.
The top five banks reported a collective 35% jump in leveraged loan volume to $256.7 billion from $190 billion in 1998, according to Thomson Financial.
Traditional Wall Street investment banks also continued to make market share gains during the year, although they still trailed far behind their commercial bank brethren. Goldman, Sachs & Co., which tailors its business to large transactions that tie in to its advisory business, saw its overall ranking jump to 11th last year, from 17th in 1998, as volume nearly doubled to $17.2 billion.
Credit Suisse First Boston climbed to eighth, from 13th in 1998, as volume jumped 72%, to $19.8 billion.
J.P. Morgan & Co. actually saw its overall market share sliced nearly in half, part of a deliberate strategy to concentrate capital resources on certain higher-growth sectors in both investment-grade and high-yield categories, according to Michael Mauer, managing director and head of Morgan's syndicated lending group. Market share declined to 5.5% at the end of 1999, from 10.3% in 1998. Volume declined 46%, to $57.9 billion in 1999.
Bankers within the leader pack predicted they would enjoy a continuation of strong growth this year. "We've shifted into a new zone," said Peter Gleysteen, group head of global syndicated finance at Chase.
Mr. Gleysteen said the outlook for the loan market is strong this year based on four key trends: demand for financing for corporate mergers; continued strong investment financing demand from the telecommunications industry; demand for emergency financing from companies that run into trouble with Internet projects; and demand for leveraged buyout financing.
Chase and Bank of America posted double-digit gains both in overall syndicated loan volume and in the leveraged loan sector.
New York-based Chase recorded yearend 1999 market share of 33.8%, up from 26.1% at the end of 1998, according to Thomson Financial. Chase structured and priced 605 loan packages totaling $356.7 billion, a 30% increase in volume over 1998.
Bank of America saw its market share rise to 21.2%, from 16.9% in 1998. The Charlotte, N.C., banking company structured and priced more loan packages than Chase, a total of 818, though in dollar terms it trailed, with $223 billion, up 26.6% from the year earlier.
"The market has boiled down to a two-horse race," said John Finan, a managing director on Bank of America's New York-based syndications desk.
In the leveraged loan market, Chase also ranked first among book managers, with 28.4% market share representing 310 loan packages worth $111 billion. Bank of America came in a close second, with 22.7% market share for 482 packages worth $88.7 billion. Chase's volume in leveraged syndicated lending rose 47% during the year, while Bank of America's rose 38%, according to Thomson Financial.