ARTICLE
4 December 2019

EU Loan Syndication And Its Impact On Competition In Credit Markets - Are You Aware Of The Risks?

DP
DLA Piper UK LLP

Contributor

DLA Piper is dedicated to helping forward-thinking businesses address today’s challenges and shape a better world. With a bold and dynamic culture, it emphasizes excellence in client relationships, community service, and people development. The firm fosters creativity, strategic thinking, inclusivity, and collaboration to exceed expectations. Recognizing the importance of environmental, social, and governance (ESG) issues, the firm actively supports clients in transitioning to sustainable futures. It promotes purpose, transparency, and sustainability within its own governance and operations, ensuring its people are equipped to deliver exceptional results for clients while making a positive societal impact.

On 5 April 2019, the European Commission (Commission) published its massively detailed report on EU loan syndication and its impact on competition in credit markets
European Union Finance and Banking

On 5 April 2019, the European Commission (Commission) published its massively detailed report on EU loan syndication and its impact on competition in credit markets. This long anticipated report focussed on two areas of syndicated lending (i.e. leveraged buy-outs and project/infrastructure finance) in six EU Member States.

The report has identified several competition law risks arising across the different stages of the loan syndication process. The risks identified are among others:

  • the unlawful exchange of information during market sounding;
  • the abuse of market power by consortia during the formation of the lead banking group;
  • the risk around the provision of ancillary services (such as hedging);
  • potential conflicts of interest when relying on debt advisors; and
  • coordination between underwriting banks in the secondary loan market.

The risks differ based on the structure of the deal. Not only lenders but also sponsors and providers of ancillary services should take the findings into account.

Over the years it has been an established practice from the Commission to launch in-depth investigations into allegedly anti-competitive practices following its publication of an industry report (e.g. Commission launched three investigations into suspected anti-competitive practices in e-commerce shortly after its publication of its final report on the e-commerce sector inquiry).

We therefore urge companies involved in any of the stages of loan syndication to take advantage of our awareness-raising compliance training, to stay clear of unintended and costly competition law breaches.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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