Of all the battles faced by treasurers and CFOs, obtaining credit is one of the most basic. And it's a battle in which the ground has shifted a great deal in recent years as the banking industry underwent steady consolidation, eliminating many credit providers. As one bank gobbles up another, corporate credit groups lose members. When two banks that are both in a company's lending group merge, the combined entity is unlikely to offer the company a commitment equal to what the banks had provided previously, says Steven Bavaria, head of Standard & Poor's Corp.'s loan rating business. "It's always less, sometimes quite a bit less."

In the coming months, the number of big banks is expected to shrink even more, given the merger plans already announced between Bank of America and FleetBoston Financial, and J.P. Morgan Chase and Bank One, as well as additional mergers suspected to be on the drawing boards.

So should the new momentum behind this consolidation trend strike fear into the hearts of companies seeking credit? Not necessarily, many experts claim: As the number of banks has been declining, hungry new capital has begun to surge into credit markets from non-bank players–institutional investors, including insurance companies, hedge funds, collateralized debt obligation (CDO) funds and prime rate funds. Either through the sale of loans by banks or at a loan's origination by joining a loan syndicate, these lenders are channeling new liquidity into once stagnant credit markets. Even though the big banks are often leading the syndications, the new interest has meant a lot more cash looking for corporate coffers to call home. "As they've come to the table, there's ultimately more and more of a demand than ever," S&P's Bavaria says. "The liquidity in general has definitely increased."

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