European lenders are charging higher interest margins to companies including Porsche SE and limiting dollar loans to bring their own ballooning costs in line with those they charge borrowers.
Porsche agreed to increase the margin on a new 3.5 billion-euro ($5 billion) credit line last week to 170 basis points more than benchmark rates after banks balked at the initial 120 basis points proposed by the maker of the 911 sports car, two people with knowledge of the deal said. That followed increases to fees for drawing on credit lines in recent weeks.
"Banks do need to re-price corporate loans," Bridget Gandy, managing director and co-head of Fitch Rating's EMEA financial institutions group, said in a phone interview. "It is more expensive for them to borrow than corporates in the bond market, so they will have to try and pass their costs on."
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As the biggest buyers of debt sold by euro-region nations, banks will bear the brunt of losses in a Greek restructuring. BNP Paribas SA's ratings were reduced one level to AA- on Oct. 14 by Standard & Poor's, which cited funding "dislocations" and negative market sentiment. Sovereign spillover is reflected in banks' costs on the bond market, near the highest in three years at 320 basis points more than government debt, according to Barclays Capital's Euro Aggregate Banking Senior Index.
Loans Pay Less
That contrasts with the interest margin charged on high- grade loans which has halved in the past year. Investment-grade companies paid an average margin of 63 basis points more than benchmark rates for revolving credit facilities this year compared with 119 basis points in 2010, according to data compiled by Bloomberg.
Stuttgart, Germany-based Porsche is seeking to pare its loan costs by replacing the remainder of an 8.5 billion-euro deal agreed in November 2009 that cost Porsche 400 basis points more than Euribor, according to Bloomberg data. A basis point is 0.01 percentage point.
Bayerische Motoren Werke AG, the world's biggest luxury carmaker, is seeking a 6 billion-euro five-year revolving credit for five years to replace an $8 billion credit line from 2005.
The Munich-based company would pay 35 basis points more than the euro interbank offered rate to borrow under the credit line, and additional utilization fees of 20 basis points to draw more than one-third of the facility, and 40 basis points for more than two-thirds, Bloomberg data show.
BMW's interest margin is less than the 60 basis points Daimler AG agreed a year ago to draw on a 7 billion-euro credit line though utilization fees are 30 percent more, Bloomberg data show.
Porsche spokesman Frank Gaube wasn't available. BMW spokesman Mathias Schmidt declined to comment.
Dollar Limits
Another sign that banks are growing more resolute in their attitude toward loan issuers is the dollar limit imposed on a 550 million-euro loan to Adecco SA.
The world's largest temporary-staffing company agreed to lenders' demand it limit the amount it can draw in dollars to one-third, according to a person with knowledge of the deal. Glattbrugg, Switzerland-based Adecco is seeking to refinance a deal of the same size signed in 2008 that paid 40 basis points more than Euribor.
Adecco press officials didn't respond to voice and e-mails seeking comment.
"Banks are looking for ways to structure deals that mitigate the dollar-funding issue," said Michael Duncan, London-based chairman of Allen & Overy LLP's global banking practice.
Punitive Rate
The cost for European banks to swap euros for dollars for three months is near the most punitive since Dec. 2008, with lenders receiving interest of 90.5 basis points less than benchmark rates on the exchange, Bloomberg data show.
"We have seen a deal that put a cap on the amount of a facility that can be utilized in dollars," Duncan said. "We've also seen requests that loans drawn down in dollars will incur a higher margin, as well as the option for banks with problems to fund in euros" rather than the U.S. currency.
Fitch placed the ratings of BNP Paribas, Credit Agricole CIB and Banque Federative du Credit Mutuel on watch for downgrade last week, citing their holdings of periphery euro- region nations' sovereign debt and tightening dollar liquidity.
"Declining access to short-term U.S. dollar funding has to date been mitigated by high levels of liquidity in euros," Fitch analysts wrote. "A complete drying up of the interbank market would be problematic."
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