Syndicated-loan volume shrinks 82pc as exuberance disappears

The volume of syndicated loans arranged for Hong Kong borrowers shrank by 82 per cent to about US$7 billion last year from a peak of US$42 billion in 1997, according to the Asia Pacific Loan Market Association.

Hong Kong Monetary Authority deputy chief executive David Carse said at the association's inaugural luncheon that the sharp decline reflected a worldwide tendency to de-leverage following the over-exuberance in credit creation in 1997.

He said the extent of credit contraction had been particularly dramatised by the withdrawal of Japanese banks from the region.

Quoting the association's figures, Mr Carse said Japanese banks' involvement in four most recent large loan deals for the Mass Transit Railway Corp had fallen from 53 per cent in 1994, 40 per cent in 1995 and 43 per cent in 1997 to zero in 1998.

Mr Carse said that, given the current uncertain situation, the Asia syndication loans market would see more club deals - that is, with participants sharing the commitments equally among themselves - and top-heavy deals with limited retail participation, and lenders would provide more flexibility in pricing and other terms.