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    SIMON FRASER, Credit Director, Mid Markets, Lloyds Bank

     

    Banks are helping to provide the diverse funding structures businesses now seek to fund their growth. “It’s a natural development,” says SIMON FRASER, “in a financial sector that is adapting to the current economic environment.”

     

    There’s no mystery about the reasons behind today’s corporate drive for more diversified funding routes. Memories of the credit crunch are still sharp.

     

    In the last five years, we’ve seen a“domestication” of banking as global players have withdrawn to home markets. Although the major UK banks have the necessary liquidity to support their  customers, the availability of funding from overseas banks in the UK has shrunk, and now an acute concern about Eurozone turmoil is intensifying funding uncertainties.

     

    It’s therefore understandable why so many more businesses are looking for two specifics: the flexibility of innovative banking facilities, and the comfort of additional funding sources to complement their primary bank financing.

     

    We are quite comfortable with this trend. It brings greater liquidity to the funding market for our customers in a challenging economic environment. It’s a welcome development in a financial sector that has to adapt to provide the funding variety businesses now seek to fund their growth aspirations. While banks continue to be the main providers, they are not the sole source of every corporate funding need.

     

    Regulators’ demands for more robust capital buffers in banks are also contributing to the diversification of funding sources. Banks are now quite accustomed to the participation of longer-term non-bank players as part of a corporate funding structure. They, too, see funding diversity as an essential component of the business growth that will drive our national recovery.

     

    This isn’t a sudden new phenomenon. It’s been developing progressively for some time, but the current market conditions have brought a new complexion.

     

    It is common to see hybrid structures providing companies, typically, with a mix of short and medium-term funding from a primary bank or banking syndicate, and longer term – say, 10-year plus funding, which is a less natural fit for banks’ balance sheets – provided by the private placement market, or such bond-holders as life assurance companies and pension funds.

     

    Meanwhile, banks themselves are helping companies optimise their funding structures through products such as Supplier Finance, to support the supply chains of our major companies, Trade Finance, as the UK economy restructures towards exports to non-EU markets, and Asset Based Lending. 

     

    In the debt capital markets, Lloyds Bank will take companies – mostly solid, mid-cap businesses below the FTSE 100 level – into the US market, for instance, to tap the longer-term private placement opportunities. That’s certainly one attractive route to competitively-priced medium and long-term debt finance to complement our own facilities. Deals typically range upwards from £35m.

     

    Of course, companies still need the assurance of primary banking strength and experience to help structure and execute the syndicated multi-lender facilities they seek. Our track record and expertise means we’re frequently appointed as co-ordinator, bookrunner, mandated lead arranger and facility agent in major transactions.

     

    Dealing with a diverse portfolio of funders can present more challenges for businesses. But, as a bank, we’re here to support customers and help them explore the new funding landscape.

     

     

9/17/2019 3:54:14 PM