The market is also seeing a significant increase in the number of borrowers seeking consent and waivers relating to loan covenants as borrowers become concerned about extended shutdown periods and what that might mean from a business performance and therefore covenant perspective.
Loan margins are moving wider in every market and currency, although it varies by market and currency and also how significantly impacted the sector or business is by COVID-19.
As it relates to pricing, it’s clear markets globally - and it doesn't matter when it's Australia or anywhere are all in a little bit of a price discovery phase.
Timeframes to execute and close a loan are definitely extending quite considerably. Pre-COVID, it took around four weeks to launch and close a syndicated loan. In today’s market conditions, it will take probably double that time and it’s much harder to predict and manage the transaction timeline.
Tenors on transactions have inversely contracted. Before the crisis, there was increasing appetite among banks for seven-year loans for investment-grade borrowers.
Currently, we are limited to a five-year market. And there are quite a number of instances where banks are actually pushing back even on five-year transactions and really trying to keep the tenors short on their lending to no more than three years.
What is reassuring for borrowers to understand is despite the uncertainty and volatility, the underlying depth and strength of the loan market in Australia is very strong. There is a lot of support for borrowers among banks, so I think that's a real positive, from an overall loan market perspective.
Gavin Chappell is Head of Loan Syndications – Australia at ANZ.
This story is an edited version of comments given by Chappell in an ANZ customer call in April.