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Banks Begin To Clear The Leveraged Finance Overhang Nov 07
Standard & Poors, Nov 2007
Abstract
The long bull run in global leveraged finance came to an abrupt halt in June 2007 as the dislocation in the subprime mortgage sector spilt over into other asset classes. The market has now entered into a corrective phase following a long upswing in the risk profile of new business, which was reflected in higher leverage ratios, the erosion of risk-based pricing, and the introduction of loans with reduced covenant protection. The speed of the market downturn has left the banking industry with about $350 billion of funded and unfunded commitments, and led to sizable markdowns in third-quarter earnings. Standard & Poor's Ratings Services believes, although not without some reservations, that leveraged finance arrangers will be able to work through...
Companies mentioned in this report are: Merrill Lynch & Co. Inc.,Energy Future Holdings Corp.,Bear Stearns Cos. LLC,PHH Corp.,Citigroup Inc.,Credit Suisse AG,Harman International Industries Inc.,First Data Corp.,UBS AG,SLM Corp.
Standard and Poors RatingsXpress Credit Research provides in-depth coverage of international corporates, financial institutions, insurance companies, utilities, sovereigns and structured finance programs. RatingsXpress Credit Research lets users determine the credit rating of holdings and identify key factors underlying an issuer's creditworthiness, distinguishes the different risk exposures for new and existing deals, and provides an understanding of how their analysts interpret key regulatory, political and environmental events and their economic impact.
Research Type: Commentary
Criteria articles describe the thought process and methodology Standard & Poor's analysts use in determining ratings. These commentary pieces discuss both the quantitative (economic and financial) and qualitative (business analysis and caliber of management) aspects of the analysis, as well as legal issues.
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