Demand for new business loans remains sluggish, but one segment of the loan market is booming.
The volume of broadly syndicated loans - those held by five or more lenders - soared nearly 52% in the third quarter, to $85.2 billion, from $56.1 billion a year earlier, according to preliminary data compiled by Loan Pricing Corp., a data base company in New York.
For the first nine months of 1992, volume rose 55%, of $258.3 billion.
Bankers agreed that refinancing of existing corporate credits, rather than demand for new funding, is pushing the market.
"It's driven by refinancings, there's no doubt about it," said Joseph Rizzi, vice president in charge of structured finance in the Chicago office of Holland's ABN Amro Bank, a major business lender in the United States.
Chrysler Deal Was Biggest
For example, the quarter's biggest deal was a $6.8 billion extension of a revolving credit line for Chrysler Financial Corp. led by Chemical Banking Corp. and Swiss Bank Corp.
Chemical has solidified its position as the dominant player in the loan syndication market
since it merged with Manufacturers Hanover Corp. at the end of last year.
In the third quarter, Chemical was agent or co-agent on $26.1 billion worth of deals, far ahead of second-ranked J.P. Morgan & Co., which participated as agent or co-agent on $14.6 billion worth of deals. Chase Manhattan Corp. followed close behind, at $14.1 billion.
Chemical's third-quarter performance surpassed the combined year-ago results of the old Chemical and Hanover by the whopping 180% - indicating that the merged bank is gaining market share at the expense of others.
Indeed, Chemical has filled the shoes of once-dominant Citicorp, which fell to fourth place in the third quarter.
"It seems to us that the market has recognized the combined institutions' commitment to this business," said James Lee, senior managing director at Chemical.
While the market for big-ticket refinancings is flourishing, other segments of the loan market continue to languish.
"It looks almost as though we are operating dual commercial lending markets," said Christopher Snyder, president of Loan Pricing Corp.
There's hardly any evidence, for example, of working capital financing, said Mr. Snyder, an economist by training.
Middle-market loan volume, meanwhile, "is in the worst dive since right after the Arab oil embargo" in 1973, Mr. Snyder added.
Few if any loans to middle-market borrowers find their way into the loan syndication market because they are too small.
Overall business lending activity, as measured by the amount of commercial and industrial loans on the books of the nation's banks, has been in a protracted decline, and there's no sign of a turnaround.
In July, the Federal Reserve Board reported that, for the first time in 27 years, banks held more government securities on their books than business loans.
Some bankers and economists have warned that business loan demand could remain sluggish - even if the economy picks up steam - because of changes in inventory management.
Mr. Snyder said, however, that there is some anecdotal evidence suggesting that an inventory crisis could be brewing as a result of "just in time" inventory management techniques.
Warehouse shelves could become depleted by the first quarter, creating a boom in loan demand to finance new inventories, he said.
Meanwhile, bankers said they expect the wave of refinancings in the broadly syndicated loan market to continue for several more quarters, if not longer.
Some refinancing activity is tied to the leveraged buyout boom of the mid- to late 1980s.
ABN Amro's Mr. Rizzi said there is still more than $100 billion of LBO-related junk bond and bank debt that will need to be refinanced over the next few years.
Karen Keating managing director and head of syndications at Chase Manhattan, also noted that the syndication market will continue to see a steady stream of commercial paper backup lines.
Moreover, these backup lines are of shorter maturities these days, meaning that they will need to be replaced with greater frequency than before, Chemical's Mr. Lee said. The Top Deals In the Third Quarter Syndicated loans Size of deal (billions)ChryslerFinancial Corp. $6.82Eastman Kodak Co. 4.00Chevron Corp. 3.00USX Corp. 2.00CountrywideFunding Corp. 1.73TW Services Inc. 1.25W.R. Grace & Co. 1.23Fleet Mortgage Group 1.20Super Value Stores 1.10PanhandleEastern Corp. 1.04Source: Loan Pricing Corp. The Top Dealmakers In the Third Quarter Preliminary data on syndicated loans Volume(*) No. of (billions) dealsChemicalBanking Corp. $26.15 55J.P. Morgan& Co. 14.64 17ChaseManhattan Corp. 14.14 31Citicorp 13.07 41First ChicagoCorp. 11.69 35ABN AmroBank N.V. 11.32 25NationsBankCorp. 10.44 48Bankers TrustNew York Corp. 8.64 32Swiss BankCorp. 8.33 6Credit Suisse 7.85 12(*) Agents/co-agents receive credit fortotal volume of deal. Credit for $6.8 billion Chrysler dealawarded only to agents Chemicaland Swiss Bank.Source: Loan Pricing Corp.