Leveraged loan bankers are facing a reduction in earnings as sponsors continue to drive down fees, taking advantage of increased competition between lenders amid low deal flow. Bankers have typically hit budget based on underwriting fees, being generously rewarded to take a view on assets and sell down risk. However, fees have been squeezed in both the European and US leverage loan markets and in some cases as much as halved as deal flow compressed during the first quarter, with Europe experiencing a ten-year low, according to LPC data. "People are mispricing risk to compete with each other. They are not being paid for the risk they are taking on at all. It is back to picking up pennies in front of the steam roller while at the same time telling the steam roller to go faster," a capital markets head said.
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