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With $2.4 trn of facilities signed in 2004, the global market for syndicated loans represented no less than one-third of funds raised worldwide on financial markets. Syndicated lending — where several banks form a group to lend to the same borrower — is deemed to have generated more underwriting revenue in recent years than either the equity or the bond market. On the eve of the sovereign default by Mexico in 1982, most of the developing countries’ debt already consisted of syndicated loans. The default threatened large Western financial institutions and indeed parts of their countries’ financial systems. The eventual restructuring of Mexican debt into Brady bonds, whereby creditors saw their loans exchanged for securities guaranteed by the US government, created a precedent in the way that it changed the structure of financial markets.
KeywordsCredit Default Swap Investor Sentiment International Capital Market Loan Contract Loan Price
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