Citigroup, banks top $1 tln in Europe, Mid-East loans

Nov 18 | Updated: Nov 19 2005, 06:24am hrs
Citigroup Inc and BNP Paribas SA led banks are arranging a record $1 trillion of loans in Europe, Africa and the Middle East so far this year, as companies borrow to fund a surge in acquisitions.

The annual amount topped the trillion-dollar mark for the first time this week, buoyed by companies such as Cie de Saint-Gobain SA, Europes biggest building materials supplier, borrowing to pay for a $6.7 billion winning bid to buy BPB Plc.

Companies are increasing debt as acquisitions in the region reach $970 billion, the highest in five years. Acquisition loans make up 29% of this years credits, up from 16% in 2004, when most deals refinanced existing bank lines. Companies are also borrowing to expand production, said Steven Victorin, head of global loans for North America and Europe at Citigroup Inc in London. Acquisition financing and general corporate loans are driving the market now, Mr Victorin said. Its a clear trend and not a one-off. Citigroup is the biggest arranger of loans in Europe, Africa and the Middle East with 8.2% of the market, followed by BNP Paribas, which has 7.1%. Royal Bank of Scotland Group Plc ranks third and Barclays Plc fourth.

Companies are spending more as money managers press for businesses to use cash to expand instead of buying back stock or paying dividends, according to a Merrill Lynch & Co survey. Forty-nine percent of investors wanted companies to boost spending rather than return cash to shareholders or repay debt, according to the monthly poll.