On Breakingviews: Leveraged-finance bankers are nursing a headache after one hell of a party, writes LiamWardProud
. The $1.5 billion of writedowns taken at just six big banks is equivalent to more than half of the whole sector’s fees this year from arranging leveraged buyouts, using Dealogic data.The good news is that markets are recovering. The same ICE BofA index, for example, has risen 7% since the end of June. That will make it easier for banks to sell down the $80 billion of loans that were stuck on their books as of late July, based on one senior banker’s estimate.
But the big picture still looks grim. With interest rates rising and the world heading for recession, it’s unlikely that banks will claw back all of the losses. Lenders behind the $15 billion debt package for the Citrix Systems buyout may end up keeping some of the debt for a while to avoid flooding the market, according to a person familiar with the deal. That chews up valuable capital.
Moreover, the buyout boom years, fuelled by cheap debt, may be over. Private equity investors like pension funds are cutting their exposure to the asset class at a
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