The market for collateralized corporate and commercial loans skyrocketed to $49.1 billion last year, more than triple the volume for 1996 and nearly 10 times the amount issued in 1995.
The issues-securities known as collateralized debt obligations that are made up of loans, bonds, or both-became an "established" part of the asset- backed securities market last year, according to a report from Moody's Investors Service.
The securitizations let banks reduce the amount of regulatory capital they would otherwise have to hold against the loans and reduce or hedge exposures to specific borrowers or industries.
"Banks have begun to treat commercial loans in the same way they treat mortgages and credit card receivables-as important sources of fee income but also as assets that may not be worth holding on the balance sheet in the face of high capital costs," according to the report.
Moody's rated 61 of the issues last year and said it expects volume this year to continue to surge, based on the backlog of transactions scheduled to come to market.
Bank-sponsored collateralized loan obligations made up the bulk of activity last year, with 16 such deals completed, totaling $34.1 billion.
Upcoming issues are expected to include several comprising emerging- market loans and bonds and a number made up of project finance loans.
Compiled by Omri Ben-Amos