Banks Whittle Their Holdings, In Move Seen as ‘Ray of Hope’
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American banks from Goldman Sachs Group Inc. to Lehman Brothers Holdings Inc. have whittled their holdings of leveraged buyout loans to $129 billion from $163 billion at the beginning of the year by offering the debt at discounts, according to analysts at Bank of America Corp.
The decline is a “ray of hope” for banks amid a slump in credit markets and a slowing economy, said analysts led by Jeffrey Rosenberg. The firms also have $73.6 billion of high-yield bonds they need to sell, they said.
Banks have been breaking ranks from their lending groups and offering their own pieces of the LBO loans at as little as 80 cents on the dollar to get the debt off their books. New York-based Lehman yesterday said it has reduced its LBO backlog by $6.1 billion to $17.8 billion since the beginning of the year. Goldman Sachs halved its holdings to $20 billion and Morgan Stanley reduced its pipeline by 20%.
The buyout industry, including Blackstone Group, Apollo Management LP, and Kohlberg, Kravis Roberts & Co., all based in New York, negotiated more than $370 billion in financing to back acquisitions such as the $32 billion purchase of Texas power producer TXU Corp. and the $46.8 billion sale of Canadian telecommunications company BCE Inc. to an investor group led by the Ontario Teachers Pension Plan, the largest buyout ever.
