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New snc loan review to begin in february


´╗┐U.S. regulators are slated to begin in February the first of two annual reviews of large syndicated loans as they seek to further curb risky lending, sources said. The Federal Reserve (Fed), the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corp (FDIC) are increasing the frequency of their assessment of loan underwriting standards, known as the Shared National Credit (SNC) review, as banks arrange fewer credits but regulators warn there is still room for improvement. A second SNC review, which analyzes any loan or loan commitment of at least $20 million that is shared by three or more supervised institutions, will take place later in 2016, sources said. It previously was conducted once a year, typically during May and June. One report will be released later in the year. Regulators have sought to limit risky lending in the $870 billion leveraged loan market, which provides financing to companies to back acquisitions including JAB Holding Co's purchase of single-serve coffee maker Keurig Green Mountain, by ratcheting up the scrutiny of banks' underwriting. Established in 1977, the SNC review took on increased importance following the release in 2013 of updated Leveraged Lending Guidance where regulators noted volumes of loans to highly indebted companies, known as leveraged loans, had increased and prudent lending practices had decreased. In the guidance, the regulators noted that certain lending characteristics were "aggressive" and flagged loans with little or no lender protections, known as covenants, and debt to earnings before interest, taxes, depreciation and amortization (EBITDA) ratios, or leverage, of more than 6.0 times. They also said at least 50 percent of a company's total debt should be able to be repaid within five to seven years.

An OCC spokesperson, a Fed spokesperson and an FDIC spokesperson all declined to comment. FUNDING CHALLENGE In efforts to reduce potential systemic risks, regulators in the last three years have increased pressure on the U.S. leveraged loan market and the result has been less loan volume and, on average, lower leverage for buyouts.

There was $294.5 billion of U.S. institutional loans issued in 2015, down from $639.4 billion in 2013, according to Thomson Reuters LPC data. Total leverage for large U.S. corporate buyouts in 2015 was 5.96 times compared to 6.18 times in 2013, according to the data. In the fourth quarter of 2015, 76 percent of institutional loans issued were covenant-lite, compared to 59 percent in the first quarter of 2013 when the guidance was issued, according to LPC data. Amid record low oil prices, concerns about China and volatility in the equity markets, lending institutions are sitting on debt commitments, including loans to back Dell's purchase of EMC Corp.

The banks are also stuck with some buyout loans, initially offered to investors in 2015, that they were forced to shelve on their balance sheets as demand dropped when market conditions deteriorated. Among the credits waiting in the wings is the financing to back the biggest leveraged buyout of 2015, Carlyle Group's purchase of data storage unit Veritas from antivirus software maker Symantec Corp. The backlog of unsold debt may raise additional questions during the upcoming review when regulators' examine loan underwriting. The 2015 SNC reviewed 667 leveraged loans with $624.3 billion in commitments and found that the number of loans originated with potential weaknesses fell. After the issuance of a frequently-asked-questions document "for implementing the March 2013 Interagency Guidance on Leveraged Lending, the volume of non-pass leveraged loans declined sharply," according to the 2015 SNC report. "However, weak underwriting continues to be found in leveraged loans."

Press digest australian business news april 4


´╗┐Compiled for Reuters by Media Monitors. Reuters has not verified these stories and does not vouch for their accuracy. THE AUSTRALIAN FINANCIAL REVIEW (this site)--The days of the corner store are numbered, said grocery, liquor and hardware marketing and distribution company Metcash chief executive Andrew Reitzer yesterday as the company announced profit for the 2012 financial year would drop about 45 percent. Metcash "management is doing a very good job," said UBS analyst Ben Gilbert, "but with Aldi and Costco rolling out stores and Woolies and Coles looking at small format stores it does increase the pressure." Page 13.--Scott Charlton will take over as chief executive of Transurban in July when Chris Lynch departs. Mr Charlton is currently chief operating officer at Lend Lease and was chief financial officer for Leighton Holdings . "I've been involved with infrastructure one way or another since I left university  I've worked on almost every toll road in Australia," said Mr Charlton yesterday, and noted that Transurban's future could include: "building out existing assets, cost cutting or connection networks." Page 13.--QR National could make a request of Fair Work Australia to intervene in a dispute between the BHP Billiton Mitsubishi Alliance and the Construction, Forestry, Mining and Energy Union on the grounds the strikes are causing damage to the business of QR, said Simon Dewberry of Allens Arthur Robinson. The Australian Services Union said continuation of the dispute could cause its members to be stood down. QR chief executive Lance Hockridge could not be drawn on the possibility that his company would act. Page 15.--Extreme weather in Western Australia, Queensland and South Australia contributed to operations, maintenance and construction services business Transfield reducing its guidance for profit in 2012, explained chief executive Peter Goode yesterday. The company has dropped its guidance from A$130-135 million to A$105 million. "Credibility of management's attribution to earnings loss because of rain is in question following consecutive annual downgrades," responded Ben Brownette, an analyst at Commonwealth Bank of Australia. Page 15. THE AUSTRALIAN (this site)--Superannuation funds in Australia could be directed by future governments to reduce their exposure to equities, according to former federal finance minister and current advisor to global investment bank Lazard, Lindsay Tanner. "On any measure, your typical Australian superannuation fund is massively overweight in equities," said Mr Tanner yesterday at a conference on corporate governance. "If governments in the future  are facing extremely unhappy super fund members  there is a risk of some kind of government intervention," he added. Page 21.

--An indicative A$299 million bid for Norton Gold Fields has been made by the largest gold mining company in China, Zijin Mining Group. "It is not a formal offer  but we are confident we can move this along and get this to closure," said Andre Labuschagne, managing director of Norton. Zijin already has a 16.98 percent share in Norton, operator of the Paddington gold mine near Kalgoorlie in Western Australia. Page 22.--Perth-based Aquila Resources executive chairman Tony Poli said yesterday that the sale of the company's stake in the Isaac Plains coal project in Queensland for A$430 million put Aquila in a strong position to develop the multi-user port at Anketell Point in the Pilbara region of Western Australia. Obtaining the funding created a "real catalyst" for the China Development Fund to come to the party over finance, and for Aquila to be granted the right to develop the port by the state government, Mr Poli stated. Page 22.--There would be no minimum thresholds imposed on trading in the "dark" equities market, said Australian Securities and Investments Commission deputy chairman Belinda Gibson at a conference in Melbourne yesterday, at least not until more is known about how activity in the dark market is impacting equities trading. Expressing disappointment with the lack of action from the regulator, a spokesman for the Australian Securities Exchange said: "unchecked growth in dark pool activity has the potential to undermine  the lit public market." Page 23.

THE SYDNEY MORNING HERALD (this site)--The Directors' Sentiment Index six-monthly survey released yesterday rated global uncertainty as the major economic challenge facing companies. John Colvin, chief executive of Australian Institute of Company Directors, addressed issues raised by the report and added that if Australia wanted "performance and not conformance" from directors the weight of "700 pieces of legislation making directors personally liable" needed to be lifted. Page B3.--The complex class action in the Federal Court, in which Centro shareholders are attempting to recover losses they suffered when a multi-billion dollar misclassification of debt in the group's financial statements for 2006-07 was made public, continues. Then chief financial officer Romano Nenna said yesterday that he had experienced panic attacks during 2007 while negotiating with a number of banks to refinance the group's debt. Page B3.--In 1990, Iraq defaulted on the A$480 million it owed to the then Australian Wheat Board relating to three years of wheat supplies from over 50,000 farmers. Now a rescheduling of the debt means there will be A$50 million to distribute to the farmers over the next 17 years with about A$4 million to be disbursed this year. Forensic accountants Ferrier Hodgson have the task and partner Greg Meredith reports that they are writing to 52,000 people listed on grower records from 1990. Page B3.

--United States institutional investor Christian Brothers Investment Services (CBIS) has tabled a resolution for the next annual general meeting of News Corporation calling for the roles of chairman and chief executive, currently both filled by Rupert Murdoch, to be separated. The "lax ethical culture and lack of effective board oversight" demonstrated by the "still emerging scandals" needed to be addressed by an independent chairman, CBIS claimed as it ensured all News Corp shareholders would have the opportunity to vote on its resolution. Page B4. THE AGE (this site)--In response to the Australian government's veto on Chinese company Huawei from tendering for national broadband network work, the Chinese ambassador has called for Chinese companies to be treated the same as those from other nations. "We hope that Huawei and all other companies from China will be able to enjoy fair and equal competition opportunities in Australia, as companies from other countries," said Chen Yuming in Canberra yesterday. Page B1.--"The name OneSteel has  been an impediment in recent years  we have found many investors, particularly overseas, have had perceptions that we were solely a steel company due to the name," said OneSteel chief executive Geoff Plummer yesterday in Melbourne as the company became Arrium Ltd. The change of name was supported by major shareholder AXA while Todd Scott, an analyst with RBS, noted that "half the assets and almost 60 percent of the revenues are still Australasian steel." Page B3.--Mandatory "kill switches" will be required in computer trading platforms that enable high-frequency trading as the Australian Securities and Investments Commission (ASIC ) takes steps to prevent a "flash crash" similar to the one that occurred in the United States markets. "These trades now dominate the market," said ASIC deputy chair Belinda Gibson. "That is not, per se, a problem, though it certainly complicates our job of market surveillance," Ms Gibson added. Page B3.--If foreign members of the crew working to lay offshore pipe work for the A$43 billion Gorgon gas project in Western Australia were prevented from working, due to the lack of 417 or 457, visas it could cost the project A$1 million a day, said Richard Hooker, the barrister acting for Swiss contracting company Allseas Construction. In the Federal Court in Perth, Allseas is seeking confirmation from the Minister for Immigration and Citizenship on the status of workers currently in possession of visitors and conference visas. Page B7.