“Declines in syndicated loans in the commodity and energy sector are consistent with trends in the broader market,” said Peter Hall, the global head of investment-grade loan syndicates at Bank of America Merrill Lynch in London. “The next big wave of refinancing is due in two years, so 2014 and 2015 are going to be much busier.”
The average interest banks charge for loans to commodity companies has risen to 325 basis points more than benchmark lending rates, from 268 basis points in 2011, according to data compiled by Bloomberg. A basis point is 0.01 percentage point.
Globally across all industries, banks charged 323.4 basis points above lending rates compared with 282.3 basis points in 2011. Syndicated loans across industries declined 21% to $2.99 trillion in 2012, data compiled by Bloomberg show.
RBC Capital Markets, a unit of Royal Bank of Canada, led the advance by Canadian banks last year, taking fifth place with $28.4 billion of loans, little changed from a year earlier. TD Securities Inc., part of Toronto Dominion Bank, arranged almost $19.9 billion for seventh place, and was one of only two in the top 10 to increase overall lending, along with Barclays Plc. Bank of Nova Scotia, based in Toronto, oversaw $16 billion of loans to take 10th place. Wells Fargo, Barclays, Nova Scotia and BNP Paribas declined to comment for this story.
“Resource financing will go up this year,” said Burke Smyth, the co-head of Canadian credit origination at TD Securities in Toronto. “There is nothing to prevent it from seeing an increase as commodity prices recover a bit, foreign companies start to look at Canada and the U.S. starts to grow.”
Canadian banks have been ranked as the world’s soundest for five consecutive years by the Geneva-based World Economic Forum. They are also buying more assets, including Bank of Nova Scotia’s agreement in August to purchase ING Groep NV’s Canadian unit for C$3.1 billion ($3.15 billion).
The “banks are playing off the strength of their balance sheets and expertise that we have in metals and mining,” said Mark Chandler, the head of Canadian syndicated and leveraged finance at RBC Capital Markets in Toronto. Canada is home to Barrick Gold Corp., the largest gold miner, and Potash Corp. of Saskatchewan Inc., the biggest fertilizer producer. Commodities are about half of Canada’s exports, government figures show.
Natural-resource and energy companies announced $202.8 billion of mergers and acquisitions in the fourth quarter, accounting for 33% of the annual total, data compiled by Bloomberg show. Rosneft raised $16.8 billion in loans last month to finance the TNK-BP acquisition, to become the world’s largest publicly-traded crude-oil producer.
Loans to commodity companies in North America declined 24% to $317.9 billion while those in Europe, Middle East and Africa tumbled 31% to $140.9 billion, data compiled by Bloomberg show. There was an 8.7% drop in the Central Asia and Pacific Rim region to $92.7 billion.