After a steady diet of deals throughout the year, syndicated lenders are anticipating a selective and slower flow of business in the last few weeks of 1996.
Syndicated lending volume is on track to beat last year's $818 billion record, according to Loan Pricing Corp. At the end of the third quarter, U.S. syndicated lending volume had reached $623 billion, up from $598 billion at the same point last year.
Up until now, the fourth quarter, with a blockbuster $12.5 billion loan for Norfolk Southern and a $4.8 billion deal for CSX in the market, has shown little sign of letting up. But the combination of the holidays and concerns about meeting next year's budgets may push some deals off until early next year, lenders said.
"Bankers have had a great year in 1996," said Michael Zupon, a managing director at NationsBanc Capital Markets. "As a result, it's our intention to put a lot of the deals off for December and bring them in January."
It's not unusual for loan volumes to slow down at yearend. But this year, the falloff is expected to be particularly pronounced because of the market's torrid pace.
Over the next few weeks, the lending market will be dominated by low- risk deals for name brand credits, bankers said. More difficult transactions are likely to be postponed until the first quarter of 1997, when bankers will be hungrier to book high-yielding loans.
"The market will do those deals which make sense and provide good value as a transaction, but ones that are at the margin and are aggressively structured or priced could experience some difficulty," said a Chase official.
Additionally, as the year draws to a close, bank loan investors become more conservative, so as not to jeopardize the returns they built up all year. Their bonuses are often tied to their portfolio's annual returns.
Because 1996 was such a success, bankers have earmarked even more capital for lending next year.
"My point for 1997 is that this is going to be a year more about meeting budgets" than establishing a particular place in the rankings of the country's largest loan syndicators, said Bruce Ling, the head of loan syndications at CS First Boston.
To be sure, the market will not come to a screeching halt during the last few weeks of 1996. Today, Bank of New York Corp., Chase Manhattan, and Toronto Dominion are expected to launch a $900 million financing for American Radio in Boston.
"We anticipate being extraordinarily busy in the last three weeks of the year," said Robert C. Griffin, an executive vice president at BankAmerica Corp. "We intend to bring all the deals that we have in the queue to market. We're not trying to orchestrate bringing deals to the market based on the December doldrums."
Added Ted Virtue, managing director and head of corporate finance for BT Securities: "Companies aren't focusing on bank budgets when they are doing a deal. There is an inordinate amount of liquidity to handle most everyone's demands. This is a supply-driven marketplace."
Other lenders agreed that syndication volume would remain consistently strong through the end of the year, driven in large part by the record- shattering pace of mergers and acquisitions.
"We are financing four companies that are making what for them are major acquisitions," said Robert Markus, director and co-head of debt finance for SunTrust Capital Markets, Atlanta.
"I don't see any slowing down in the mergers and acquisition-driven market," he said.
The breakneck pace of consolidation across a host of industries drove much of the loan volume this year, as companies looked to the bank market for a guaranteed and immediate source of funds.
Through the middle of last week, corporations had announced 9,350 deals worth a total of $594 billion, according to information from Securities Data Co.
Indeed, the merger volume shattered last year's record of $518 billion on Nov. 9, when British Telecom stunned the telecommunications world by agreeing to purchase MCI Corp.
Nevertheless, few lenders are expecting multi-billion dollar blockbusters to come to the market over the next few weeks.
Gary Ladolcetta, a loan syndicator at BNP, said syndication volumes will "coast till the end of the year.
"I don't sense that there will be a heavy push in the last couple of weeks," he added.
Bankers generally expect lenders to spend the holiday season shopping for presents, not bank deals.
"You can close a deal in December," said NationsBanc's Mr. Zupon, "but it will just be more difficult to execute."