Anyway, banks that are still plagued by pending loans are undertaking acquisition deals
(Bloomberg) – Banks in lending operations are still willing to arrange financing packages, even if some lenders experience unrest caused by tariffs that prevent them from unloading their debt to investors.
If the price and borrowers are correct, a handful of euro and dollar transactions suggest that leveraged financial bankers are concerned about “pending debt.” This includes underwriting KKR&Co. Purchase a Swedish healthcare company, a $1.7 billion debt agreement to help it acquire its post-trade service provider Osttra, and about $2 billion for Silver Lake management’s stake in Chips Maker Maker Altera.
The preferred borrower usually has a stronger credit rating that can be supported by a well-known sponsor or a identifiable brand in the defensive field. They also tend to be less under tariff pressure.
“The sell-off” is “very large, but not promiscuous” compared to periods when major markets were completely closed. “This time it’s different departments, quality and exposure.”
A major test is the $4 billion sale of loans and bonds from financial QXO Inc., the largest acquisition financing since reciprocity tariffs by U.S. President Donald Trump on April 2, a data exhibition compiled by Bloomberg.
Banks on both sides of the Atlantic are taking stock of volatility, which makes risky loans and bonds almost impossible to sell this month. Some people move from the typical pathway of widespread joint sales, which helps to offload debt into a private credit fund full of goods. For example, KKR is weighing one unit of the loan in at least one debt package it raises, while other sponsors are considering taking similar actions.
Wall Street is desperate to avoid replaying 2022, when the market was in a slump and the backlog of banks was about $80 billion, they had to unload in huge losses, in many cases, private credit funds. This time, banks continued to underwrite transactions, although at a slower pace.
The uncertainty over its largest trading partner and the risk of a global recession has left many deals taking over many and leaving behind $4.6 billion in Hung loan loans. Financing is “pending” before the acquired bank cannot sell its debt to investors.
For some of the largest U.S. banks, this history is enough to keep them away from new deals. Morgan Stanley declined a chance to join KKR’s underwriter group Swedish deal, while the bank recently received a $5.75 billion 364-day bridge loan to support the purchase of Clearlake Capital Group’s Dun & Bradstreet Holdings Inc.
The European market is a bit tolerant. In the most turbulent weeks in recent weeks, bankers have managed to sell debts that support Bain Capital’s purchase of German real estate equipment apleona Group Gmbh. According to people familiar with the matter, they had to add sugar prices, but still charged the full fee.
According to Morningstar, secondary market prices for leveraged loans in Europe and the United States fell sharply after the tariff announcement. Since then, while both of them have recovered a certain foundation, the U.S. index has fallen again after Trump’s wide range of areas against Fed Chairman Jerome Powell.
The decline has caused some investors to tempt liquidate existing holdings to keep cash in the secondary market better deals and wait to see if the market has found its lowest point.
“We’re willing to miss some of these products,” said Scott Pike, senior portfolio manager for revenue research management. “We don’t feel compulsive. It allows us to look at the product and bid for a little bit.”
Europe’s recovery is more rapid in reflecting the development of currency and government bonds, with euro trading volumes up to three years, while Germany’s benchmark bonds are the biggest monthly gains on government bonds since 2003.
After a brief deal, Wall Street lenders prepared at least $38 billion worth of bonds and loans to acquire the dollar and euros at the end of March. That was before the announcement of Trump’s Liberation Day on April 2.
Although the U.S. president has suspended the worst tariffs in most countries, leveraged lending bankers are still upset, despite the crucial China.
Further testing of appetite will come from the launch of a €2.5 billion high-yield bond-backed Flutter Entertainment Plc’s acquisition of Playtech PLC’s Italian gambling business and $4.25 billion in bonds and loans backed by Sycamore Partners’ boots, part of the larger Walgreens Boots Alliance Incriance Inc.
– Assisted with Alice Gledhill and James Hirai.
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