As global economic activities were getting stronger in the 1980s, the corporate loan market found new direction, along with the stock market reviews. Big banks were instrumental in bridging the gap between corporate borrowers seeking loans and banks eager to lend. Loan underwriting and syndication grew on an unprecedented scale to fuel corporate expansion in response to the economic growth of that decade.

The Corporate loan market essentially provides funding to corporate who need funds either to meet short-term working capital requirements or for financing mergers and acquisitions. Historically, banks have been the main originators of loans to companies and they have grouped them to syndicate or sell off pieces to other banks or financial institutions. Today, we refer to this form of financing as the syndicated loan market.

The reason behind the rapid growth of the secondary loan market is particularly because loans are private placement assets which are based upon negotiations and agreed terms.

Leveraged loans have a unique risk/return investment profile. They are floating rate assets with a base rate, generally the London Inter-Bank Offering Rate (LIBOR), which usually resets at least every quarter, thus keeping pace with changing interest rates. Loans are frequently fully secured with covenant protection usually resulting in not only lower default rates than high-yield bonds but also higher recovery rates.