RLPC-UPDATE 1-EMEA syndicated loans down 38 pct in first half

By Tessa Walsh

LONDON, June 29 (Reuters) - Lending in Europe, the Middle
East and Africa continued to slump in the first half of 2009,
with a 38 percent year-on-year drop to $327 billion, according
to Thomson Reuters LPC data.

The fall was the EMEA market's second heavy consecutive fall
at the half-year stage and lending has now dropped 60 percent
from its peak at $822 billion in the first half of 2007.

Companies' drive to diversify debt with bond and equity
issues led to continued contraction in the loan market and the
numbers also reflect the low level of merger and acqusition
(M&A) activity.

Second-quarter volume of $155 billion was 10 percent down on
the first quarter but capital markets issues boosted liquidity
and sentiment and activity improved towards the end of the
quarter as banks with improved balance sheets started lending
again.

Lending to highly rated companies made up 74 percent of
second-quarter borrowing at $114 billion, while the leveraged
market, which finances riskier more indebted companies, remained
shut for most of the second quarter although conditions also
improved.

M&A financing of $86 billion in the first six months was
down 58 percent year-on-year as a rally in equities markets
curtailed opportunistic acquisitions.

M&A lending continued to fall to $39 billion in the second
quarter from $46.7 billion in the first quarter as the standoff
between buyers and sellers continued over valuations.

In the high-grade loan market this left a mix of subsistence
refinancings and more lucrative forward start agreements, which
extend the maturities of existing loans in return for increased
margins and fees.

Some $25 billion of forward start agreements were signed in
the second quarter, which brought the volume of forward start
loans completed this year to $44 billion, making up around 17.5
percent of the market.

The largest loan to be completed in the second quarter was
the retail syndication of a 18.3 billion euro ($25.6 billion)
loan for Gas Natural (GAS.MC). The deal financed the company's
acquisition of a majority stake in Union Fenosa, and was
relaunched in January and completed in April.

The second-largest loan for an investment-grade company was
Italian utility Enel's (ELE.MC) 8 billion euro loan which backed
its acquisition of a 25 percent stake in Spanish utility Endesa
from Acciona (ANA.MC).

Enel financed the acquisition by increasing an existing 35
billion euro loan and extending the tenor of the loan with a
forward start agreement.

A $7.5 billion loan for Glencore International AG was
increased from a launch amount of $5.5 billion in mid May,
showing the revival of bank appetite and good liquidity for
defensive commodities companies.

REVIVAL IN LEVERAGE

The battered European leveraged market was boosted by a
rally in secondary loan trading prices which has relieved
pressure on banks and institutional loan investors.

Europe's top 40 leveraged loan composite climbed 12.5 points
in the second quarter to 78.36 percent of face value, bringing
gains in 2009 to 18.6 points.

Leveraged volume increased in the second quarter to $19
billion from $9 billion in the first quarter, giving a total of
$27.6 billion at the end of the first half.

Second-quarter leveraged volume was boosted by the stressed
refinancing for German cement firm HeidelbergCement (HEIG.DE),
which successfully completed a 8.7 billion euro refinancing at
the end of the quarter.

The improvement in secondary loan prices allowed the smaller
leveraged buyout market, which finances private equity firms
puchases, to re-open at the end of May.

The $1.33 billion buyout financing for NDS Group, which
backs Permira's [PERM.UL] acquisition of a 51 percent stake in
NDS Group from News Corp, was launched to a wider syndication in
late May.

The deal will test market liquidity and attempt to establish
a clearing price for leveraged loans as buyout auctions resume,
but lending to private equity firms remains low at only $1.5
billion in the first half of the year.

Reuters Loan Pricing Corporation's first-half EMEA mandated
bookrunner league table:

Volume($bn) Deals Share (%)

1. Royal Bank of Scotland 21.55 38 10.52

2. BNP Paribas 18.79 61 9.17

3. Societe Generale 16.76 32 8.18

4. Calyon 16.37 48 7.99

5. Barclays 12.75 20 6.22

6. Deutsche Bank 11.4 16 5.56

7. Commerzbank 10.66 13 5.20

8. Citigroup 8.83 13 4.31

9. Banco Santander 8.53 14 4.16

10. HSBC 8.34 16 4.07

(Reporting by Tessa Walsh; Editing by Dan Lalor)
($1 = 0.7143 euro)