Alliance Boots: Leveraged Loan Market Thawing?

By Prince of Wall Street on April 23, 2008 | More Posts By Prince of Wall Street | Author's Website

Is the leveraged loan secondary market thawing slightly? The syndication of Alliance Boots LBO related debt, which was originally offered in a bloodbath (something below 90% of par) the week the leveraged loan markets shutdown this summer, is being put back on the table. JP Morgan, Deutsche, and slew of other lenders are retrying the sale of $16bn of loans related to the Alliance Boots LBO. The banks made this decision after observing that the tone and pricing of the leveraged loan secondary market have been improving. The banks are seizing on this opportunity to sell the debt to investors. The banks wrote the bridge for the financing this summer and have held the debt on their balance sheets since the sale failed this summer.

Remember KKR closed the acquisition of Boots over a year ago. The banks aborted the sale in July after offering discounts on the debt of below 90% of par. For the most toxic issuance things have not improved much. For example, this month Goldman Sachs sold $500 million of debt financing the buyout of Chrysler for as little as 63% of par. Aggressive pricing has allowed banks to cut what was $237bn in unsold leveraged loans on their balance sheets to $95bn, according to Standard & Poor’s. Could this recent improvement in leveraged loan pricing be indicative of the start of a reopening of the market to new issuance?

Posted in Categories: Contributor, External Research, Stocks.

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