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Banks Use Markit CDS Data as New Corporate Loan Benchmark

Markit, a leading provider of independent data, portfolio valuations and over-the-counter (OTC) derivatives trade processing, today announced that it has provided benchmark pricing for investment grade corporate loans arranged by two of the world’s biggest banks.

JPMorgan and Citi have used Markit’s CDS data to provide a new Market Based Pricing (MBP) for revolving credit facilities arranged for corporate borrowers. MBP is a reference spread over LIBOR and represents a departure from the traditional method of pricing such transactions which establishes a set spread over LIBOR at transaction launch that may not reflect market-based spreads if and when the borrower decides to draw down on the facility.

Evan Zebooker, Director at Markit, said: “We are delighted to have worked with JPMorgan and Citi to launch the first of these innovative Market Based Pricing deals, and we are working with other key industry players to establish this pricing method as a market standard.”

Thomas Cassin, Head of High Grade Loan Capital Markets at JPMorgan, said: “We developed the Market Based Pricing structure in order to meet our clients’ needs for liquidity in the bank market, while ensuring that lenders are compensated at market-based rates for the capital employed.”

Steven Victorin, Head of Global Loans - Europe and North America at Citi, said: “Today's bank loan investors evaluate a number of market factors and criteria when determining whether to participate in syndicated loan facilities, and at what amount. Market Based Pricing is our approach to providing a mirror to the market to establish a market-driven price, which ensures corporate issuers have continued access to significant levels of capital throughout market cycles.”