Banks have been held to ransom by IG borrowers in western Europe, refinancing loans and screwing down on margins, in recent years. Now they are even being squeezed on deals in emerging markets, and worse, it’s happening beneath a veneer of respectability.
This year the regular round of Turkish bank loans have offered a 10bp premium for dollar commitments, with a 45bp margin for euros and 55bp for dollars. That seems a nice pick-up, especially since many lenders in those loans are European and Middle Eastern banks for which dollars are harder to come by.
But let’s not kid ourselves, given the far higher cost of dollar funding for non-US banks, a measly 10bp is not enough.
The fact is that in those Turkish loans, dollar commitments have actually been increasing lately, such as in Garanti’s latest deal.
On the other side of the coin, one banker said that he had seen a recent Schuldschein paying a premium of nearly 50bp on the dollar tranche. A premium, he said, that was more reflective of the relative cost of funding for those without a natural dollar funding base.
With banks so hungry to lend and keep a foothold in key relationships, some borrowers certainly know how to turn the screw.
The German Schuldschein market might be playing fair with its dollar premiums but the syndicated loan market certainly isn’t.