New York, March 31, 2006 - It was most definitely a borrower's market in the first quarter of 2006. U.S. syndicated loan issuance climbed in nearly every sector, while the cost of borrowing fell toward (or below) historical lows.

Overall U.S. syndicated lending jumped 33% over 1Q05 levels to land at $366 billion in 1Q06, the largest first quarter on record. One can thank a robust merger market for these statistics. Loans backing M&A activity topped $127 billion, up from $45 billion just one year ago. And, for the first time in years, it was higher quality companies that dominated M&A borrowing. Loans backing mergers to investment grade companies topped $67 billion - more than all of 2005 and nearly 10 times the level seen in 1Q05. Lenders have long prophesied the return of loan-financed investment grade mergers - and it appears that prophesy has finally come true. Thanks to these merger financings, first quarter lending to highly rated companies jumped 44% to $160 billion.

While the most dramatic growth occurred in the investment grade market, lending to leveraged companies - those companies with a rating of less than BBB-/Baa3 and with a loan margin of at least 1.5% over LIBOR - climbed as well. Overall leveraged lending hit $122 billion, up 7% from 1Q05. Though overall leveraged loan growth was modest, net new lending - those loans backing incremental financing like mergers - jumped 23% to $68 billion. Indeed, merger financing for leveraged companies increased 32% to $46 billion in the first quarter from year-ago levels. Meanwhile, loans financing LBOs jumped 36%. It was a remarkable quarter for merger financing in all segments of the loan market.

Banks, however, were not the major beneficiaries of the increase in leveraged lending. The riskier end of the loan market is divided into two lender camps: Loans provided by banks and loans provided by non-bank investors (such as hedge funds, mutual funds and Collateralized Loan Obligations or CLOs). Loans structured to be sold to non-bank investors jumped by 38% to $79 billion. Meanwhile, leveraged loans structured for banks fell by 4% to $55 billion, illustrating how banks continue to be disintermediated by non-bank investors.

While loan issuance climbed almost across the board, interest rate margins on loans universally fell. This reflects the fact that there is an almost endless supply of liquidity in the loan market. Average loan margins for A and BBB rated borrowers fell by nearly 20% when compared to year-ago levels. Meanwhile, the cost of borrowing by BB rated borrowers fell to all-time lows: In late 2002, a loan would cost a BB rated company on average 3.6% over LIBOR. Last quarter, it was only 1.6% over LIBOR.

So it's clear: So far in 2006, the U.S. corporate borrower remains firmly in the driver's seat.

Overall league tables
Top league table rankings remained the same as 1Q05 - with the exception that volumes led ranged from $4 billion to $22 billion higher for each lead arranging bank. J.P. Morgan was the leading bank loan arranger in 1Q06, with $87.56 billion and a 24% market share. Bank of America led $70.28 billion and racked up a 19% market share. Citigroup was third ($62.08 billion); Wachovia was fourth ($26.98 billion) and Deutsche Bank rounded out the top five with $14.49 billion.

Rank	Bank Holding Company	Volume	# of deals	Market Share
1	JP Morgan	87,561,423,603	170	24%
2	Bank of America	70,276,856,084	187	19%
3	Citigroup	62,079,305,787	70	17%
4	Wachovia Securities	26,980,845,000	71	7%
5	Deutsche Bank	14,485,325,182	26	4%
6	Credit Suisse	11,123,230,417	33	3%
7	Merrill Lynch & Company	9,016,500,000	11	2%
8	Barclays Bank Plc	8,577,868,856	9	2%
9	BNP Paribas	7,205,000,000	10	2%
10	Royal Bank of Scotland Plc	7,197,163,481	7	2%

Leveraged Lending
Leveraged lead arranger saw changes in the top rankings since 1Q05: J.P. Morgan ranked first with $24.94 billion. Citigroup took the second spot with $18.15 billion. Bank of America ($16.84 billion), Credit Suisse ($10.62 billion) and Deutsche Bank ($7.49 billion) rounded out the top five. Leveraged loans, which often back M&A transactions and leveraged buyouts, have been prized by lenders because of the hefty interest rates and fees paid by borrowers on those loans and related business.

Rank	Bank Holding Company	Volume	# of deals	Market Share
1	JP Morgan	24,941,550,000	76	20%
2	Citigroup	18,150,100,000	30	15%
3	Bank of America	16,837,315,297	84	14%
4	Credit Suisse	10,618,230,417	30	9%
5	Deutsche Bank	7,485,325,182	17	6%
6	Wachovia Securities	5,426,782,000	31	4%
7	GE Capital Corp.	5,105,188,422	30	4%
8	Goldman Sachs & Co.	4,902,370,436	15	4%
9	Morgan Stanley	3,980,000,000	3	3%
10	Lehman Brothers	2,765,000,000	9	2%

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