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Libor Woes Threaten Loans

Companies could shun syndicated loans, whose rates are typically pegged to Libor.

By Stephen Morris and Patricia Kuo, Bloomberg | Updated on July 10, 2012

The scandal surrounding the London interbank offered rate is threatening to undermine confidence in syndicated loans and hasten companies’ flight to bonds.

“What corporate treasurers are concerned about is the damage this Libor problem will do to market confidence,” said John Grout, the policy and technical director at the Association of Corporate Treasurers in London, which has about 4,500 members. “If people lose trust in banks and Libor, which is indexed to a huge amount of debt and derivatives instruments, market liquidity could be reduced and borrowing costs could rise for corporates.”

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