A sharp jump in third quarter borrowing, up 40% year on year, builds on a similar second quarter increase, that combined gives a 19% rise in overall year to date borrowing. This puts the European loan market on track for record annual volume.

The EMEA syndicated loan market has had a busy six months after a slow start to the year. A rush to refinance gathered momentum as blue-chip investment grade companies continued to take advantage of a sharp drop in pricing and strong liquidity in the bank market to reduce borrowing costs.

Loan refinancing accounts for 49% of overall market activity due to a lack of event-driven M&A financings. The French market has been particularly active this year, and continued to produce large refinancings in the third quarter.

The E20 billion loan for state agency CADES was the largest loan of the third quarter, and helped French volume to bypass U.K. volume for the first time. French year to date borrowing stands at $133 billion, and volume in the U.K, which is usually Europe's largest syndicated loan market, tallies $128 billion.

Investment grade companies have borrowed $409 billion this year. Financial services has been the most active sector, producing large refinancings for companies such as AA+ rated Swiss Re, which tested the market with an aggressive $4 billion refinancing that cut its interest margin from 30 bps to 21 bps over LIBOR, while extending its tenor to six years.

Bank liquidity is running at near-record levels as shown by one of the only event-driven deals of the quarter. Bacardi's $4.4 billion loan backing its acquisition of premium vodka brand Grey Goose was priced at 80-85 bps over LIBOR. The deal raised $8 billion in the loan market.

Overwhelming liquidity from banks and funds is also a feature of the leveraged loan market, which finances more indebted non-investment grade companies and private equity sponsors' leveraged buyouts (LBOs). Leveraged companies borrowed $18 billion in the third quarter, which takes lending to $79.5 billion this year. This is 14% down on last year, due to a brighter economic picture that has required fewer emergency financings.

The majority of leveraged debt - 58% - backs private equity sponsors' activity both in new LBO lending and in recapitalising existing investments to take out dividend payments. Sponsors borrowed $14.16 billion in the third quarter, which is up 91% year on year. This brings sponsor borrowing to $46 billion this year, which shows a 55.3% increase on 2003.

Third quarter LBO numbers were boosted by a series of large deals such as the sale of the U.K's Automobile Association, and the sale of Dutch publisher VNU's directories business at the end of the quarter.

Amid fierce competition for mandates, BNP Paribas emerged as the top mandated lead arranger of syndicated EMEA bank loans, arranging 185 loans worth $46.6 billion, giving the bank an 8.7% market share.

Citigroup came in second with 8.1% of the market - arranging 147 deals totaling $34.4 billion - followed by Barclays Bank which had 162 deals totaling $39 billion, which is 7.28% of the market.

Rank	Bank Holding Company	Volume (U.S.$)	Deals	Share
1	BNP Paribas	46,578,347,056.37	185	8.70%
2	Citigroup	43,371,142,924.84	147	8.10%
3	Barclays	38,993,857,984.16	162	7.28%
4	Royal Bank of Scotland	32,118,518,485.18	182	6.00%
5	Deutsche Bank	28,386,115,861.28	96	5.30%
6	JP Morgan	28,198,140,736.50	76	5.27%
7	HSBC	27,716,806,015.44	139	5.18%
8	ABN AMRO	27,275,244,861.46	118	5.09%
9	SG CIB	22,951,364,125.21	120	4.29%
10	Calyon	20,483,841,743.75	105	3.83%

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