#Leveraged loans arrangement fees software
#Leveraged loans arrangement fees plus

If that deal goes through, it could mean nearly $800 million in fees for Morgan Stanley and JPMorgan - $210 million in advisory fees plus $500 million to $575 million in loan arrangement fees, according to Freeman & Co.īut what if those banks can't sell their share of that $50 billion leveraged loan and have to write off a decline in its value?

#Leveraged loans arrangement fees software

Carlyle Group is using leveraged loans to acquire software company Veritas for $5.5 billion Sycamore Partners is using them to buy department store Belk for $3 billion and generic drug maker, Lannett, is using them to buy rival Kremers Urban for $1.23 billion, according to the Times.Īnd the Times is very careful to point out that if demand for leveraged loans increases, those banks could take lower losses or even end up making money on them.īut with interest rates rising and something causing investors to shy away from leveraged loans, this cannot be greeted as good news by Michael Dell - who was hoping to borrow $50 billion to acquire EMC. Three such deals provide a flavor for the borrowers involved. It looks like investors have less of an appetite for the current crop of leveraged loans than the supply of them created by Wall Street banks like Goldman Sachs, JPMorgan Chase, Morgan Stanley, Bank of America, and others, according to the Times.Ĭiting anonymous sources - usually a sign of fear - the Times estimates that banks will take $600 million in losses from leveraged loans that they're holding on their books that nobody wants to buy. With oil prices down over 60% since June 2014 and a general decline in commodities prices, it is no surprise that energy and mining borrowers are inspiring the most investor fear, according to Fitch. In September, Fitch Ratings forecast that leveraged loan default rates could approach 2% by the end of 2015, after five August defaults totaling $1.4 billion. Last year, companies used them to borrow $940 billion but so far in 2015, they've taken on a mere $700 billion worth of that debt, according to Thomson Reuters.Īnd more borrowers are not paying up. Since the end of 2008, Thomson Reuters calculates that corporations have used them to borrow a whopping $4.6 trillion.

What's more, leveraged loans are not small potatoes. Why the rhyme? As in the late 1980s, leveraged loans are made to companies with bad credit ratings like subprime mortgages they are being packaged into securities that supposedly give investors a diversified portfolio and like the early 1980s crisis, there is excess debt on the books of energy and mining companies. Banks make leveraged loans 'to companies that have junk credit ratings in the hope of quickly selling the debt to investors, including mutual funds, hedge funds and entities called collateralized loan obligations,' according to the New York Times. I think leveraged loans rhyme with junk bonds and subprime mortgages. What does this little financial crisis tour have to do with leveraged loans? I have often cited the Mark Twain's expression that history does not repeat itself, but sometimes it rhymes. The key causes of the crisis that Bernanke describes as the worst in history were weak subprime regulation, liar loans, global securitization, too little capital, limited transparency, skewed banker and ratings agency incentives, and lame risk management. (NovaStar changed its name to Novation in 2012 and you can pick up a share for 17 cents.) It brings back all the memories - from my first story on subprime mortgages back in December 2006 in which I recommended selling short shares of subprime lender, NovaStar Financial when they traded at $106 apiece. I am now getting to the end of Ben Bernanke's The Courage To Act. (Photo by Mark Wilson/Getty Images)įinally, there is the latest and greatest - the so-called Great Recession of 2008.

hosted by the Brookings Institute Augin Washington, DC. WASHINGTON, DC - AUGUST 17: Former Federal Reserve Chairman Ben Bernanke speaks during a forum.