Big banks are on track to lose an additional $5 billion to $10 billion in the coming quarters, according to bankers and analysts.
In the foreign debt market, investors borrow money from banks to make purchases Companies.
As the market slowed and banks struggled to distribute existing loans to third parties, they responded with tighter regulations on new loans.
“If a bank wants to bring a deal to market for investors, they have to bring it to market at a discount,” said Dan Deung, high-yield, leveraged debt portfolio manager at fund manager Columbia Threadneedle.
According to Dealogic data, Goldman Sachs, Bank of America and Barclays are among the top three underwriters of leveraged buyout financing in the US and Europe from Q4 2021.
Banks typically sell loans rather than hold them. Companies intend to disburse about $80 billion to $100 billion in leveraged loans to third parties in September and October, the three executives said, adding that market turmoil is delaying the process.
If they sell at a discount, the banks will have to absorb some of the losses, they said.
The market has been rattled by the Federal Reserve’s plan to tighten monetary policy to fight inflation, which has fueled a strong selloff in fixed-income assets this year.
Among the biggest deals was the Bank of America-led financing of the $16.5 billion acquisition of software company Citrix by affiliates of Elliott Management and Vista Equity.
The bank is also financing Apollo’s deal to buy Tenneco for about $7.1 billion, including debt.
Two exchange-traded funds that track foreign debt, the SPDR Blackstone Senior Debt ETF and the Invesco Senior Debt ETF, are down 4.9% and 3%, respectively, this year.
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