Is U.S. Regulatory Guidance Driving Leveraged Lending Into The Shadows?

Potential Opportunity for Certain Non-U.S. Lenders and Private Funds

Since U.S. regulators published the Interagency Guidance on Leveraged Lending (Guidance), in March 2013, commentators have speculated on its likely market impact (the guidance is discussed in detail in an April 2013 Osler Update). Some have theorized that the Guidance – and in particular its concern over debt-to-EBITDA or leverage ratios exceeding 6.0 times – would push leveraged lending away from U.S.-regulated banks and into the hands of unregulated (or less regulated) lenders, including private funds and certain foreign banks. Others have guessed that less regulated products, such as high-yield bonds, would end up as beneficiaries.