Banks Stuck With $1.6 Billion of Unsold Loans Amid Market Rout

[PhrankT]

Bloomberg News

A rout in the once-hot market for risky corporate loans has some of Wall Street’s largest banks stuck with at least $1.6 billion of unwanted leveraged buyout debt.

Banks including Barclays Plc, Goldman Sachs Group Inc. and Bank of America Corp. -- among the top providers of loans for LBOs -- have struggled in recent weeks to sell loans they’ve agreed to make for private equity deals, as concerns about the global economic outlook spurred investors to flee risky assets.

At least four loan sales for buyouts and acquisitions have failed to clear the market so far this month, forcing the banks to keep the debt on their books, according to data compiled by Bloomberg and people familiar with the matter.
The hope is that by waiting until next year to sell the debt to investors the banks might be able to avoid a fire sale. But holding onto the loans could weigh on banks’ earnings in the fourth quarter.

The hung deals are equal to 14 percent of the $11.7 billion of loans sold in December, according to Bloomberg data. But they also represent a small fraction of the more than $2.3 trillion of loans to corporations that were on U.S banks’ books as of Dec. 12, according to Federal Reserve data.

All companies or banks mentioned have either declined to comment or did not respond to requests for comment.
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https://www.google.com/amp/s/www.bloomberg.com/amp/news/articles/2018-12-21/banks-stuck-with-1-6-billion-of-unsold-loans-amid-market-rout

[pbmus]

1. Uh...oh..

[democratisphere]

2. Too BIG to fail?!

That is the question.

[Squinch]

3. Here we go again.

[Igel]

4. It's not bad debt.

It's just debt they took on, thinking they could sell.

It produces not doubt as to the worth of assets across the market, whether held by banks, individuals, or pensions, leading not just to widespread liquidity problems when they can't be sold, but doubt as to the value of the assets already traded and held. This produces a liquidity problem for some individual banks.

If the loans are good, within the expected tolerances, they eventually self-liquidate.

It will also cause banks to be a bit more circumspect.

[Squinch]

5. Lol. Its not good debt!