LONDON - Last week The Loan Syndications & Trading Association (LSTA) hosted its inaugural London conference. A room full of European and U.S. players gathered to discuss the increasing cross-border business and to explore the differences between the U.S. and European markets. Participants focused on how these disparities could be bridged to encourage a more global and liquid leveraged loan market.

Clearly, participants said, the market is becoming more liquid. According to the LSTA, in 2004, the actual average trade size was estimated at $3.2 billion; by the third quarter of 2006, trading had surpassed the $2.1 billion mark. The LSTA said it would be hosting its first global operations meeting later in the week and one of the initiatives it wants to push through is the use of CUSIPs on European loans. At the moment, loans in Europe are not tagged, and therefore, are less discernable than their U.S. counterparts. A move to bring more transparency would facilitate the shift to a more global, electronic market.

According to Ruth Yang, director of Standard & Poor's leveraged commentary and data, about 75% of the U.S. market was publicly rated in 2006. Prime funds require such transparency and are behind this push to develop a more public U.S. market, she added. In Europe, the market is primarily a nonpublic market, with over 85% of the deals placed in 2006 done on a private market basis. But the lack of transparency across the Atlantic hasn't stymied growth prospects. Yang estimated that around 39 billion ($51 billion) of cash needs to be put to work today. Investor appetite for European leveraged loans almost tripled in 2006 to 35 billion from a reported 11 billion in 2004.

"We are a year behind where the U.S. is at," said Tim Alexander, executive director and head of EMEA loan trading at UBS. "The market has been taken through adolescence pretty quickly, people have looked at the risk return and have decided to build business here - the fact that private equity wants to do more and more deals is leading to greater and quicker growth."

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