April 23 (Bloomberg) -- Deutsche Bank AG, JPMorgan Chase & Co. and six more lenders are reviving the sale of 8 billion pounds ($16 billion) of loans used to finance the buyout of U.K. pharmacy Alliance Boots Ltd., said analysts at UniCredit SpA.

The banks are taking advantage of a 6 percent increase in the price of LBO loans this month to offer debt they have been stuck with since the subprime mortgage crisis forced them to stop marketing the deal in July, according to UniCredit's head of debt strategy Jochen Felsenheimer.

``This recovery in leveraged loans is seen as a window for the banks to get rid of these loans,'' Munich-based Felsenheimer said in an interview today. ``All the banks have the same incentive to do it so they will find an agreement on price.''

Banks trapped with debt from underwriting LBOs have cut their holdings of the loans in the U.S. by a half to $95 billion by offering discounts of as much as 37 cents on the dollar and providing financing for the buyers, according to Standard & Poor's. Bankers halted the loan sale for Boots, Europe's biggest LBO, along with Chrysler LLC on July 25, starting a backlog of unsold debt that Bank of America Corp. says peaked at more than $370 billion worldwide.

Ronald Weichert, a spokesman for Deutsche Bank in Frankfurt, and Stefania Signorelli, a London-based spokeswoman for JPMorgan, declined to comment.

Loan Recovery

Kohlberg Kravis Roberts & Co. in New York borrowed most of the 11.1 billion-pound cost to buy Nottingham, England-based Boots. The lending group also included London-based Barclays Plc, New York-based Citigroup, Bank of America Corp. in Charlotte, North Carolina, Merrill Lynch & Co. of New York, Edinburgh-based Royal Bank of Scotland Group Plc. and UniCredit in Milan.

Buyout firms typically borrow about two-thirds of the financing needed for acquisitions. Underwriters earn fees for the risk of holding any of the debt they can't sell to investors. The loans are known as leveraged, or high-risk, high- yield, and are rated below Baa3 by Moody's Investors Service and BBB- by S&P.

Prices for leveraged loans began recovering after the Federal Reserve backed the takeover of New York-based broker Bear Stearns Cos. by JPMorgan last month.

The most actively traded U.S. loans rose to a three-month high of 92.13 cents on the dollar yesterday from 87.1 cents on April 1, according to S&P. Prices dropped to a record-low of 86.3 cents on Feb. 13.

Europe's benchmark index of credit-default swaps on leveraged loans, called the Markit iTraxx LevX Senior Series 2, increased to 101.125 today from 97 when it began trading on March 17, according to Morgan Stanley.

`Haircut'

Deutsche Bank was left with the biggest chunk of unsold LBO debt globally, according to a report by BNP Paribas SA this month. Citigroup Inc., which had the next biggest backlog, said last week it reduced its holdings to $28 billion from $43 billion this year. Citigroup sold some of the debt to private equity firms for less than 90 cents on the dollar and provided new loans to finance the purchases, according to Fitch Ratings.

Goldman Sachs Group Inc. sold $500 million of debt used in the buyout of Auburn Hills, Michigan-based Chrysler for as little as 63 cents on the dollar earlier this month.

``The deal will not be sold without providing an attractive haircut to investors,'' UniCredit's Felsenheimer said of the Boots debt in a report today.

Covenant-Lite

Lenders to Boots have fewer rights to access financial reports and restrict spending because the deal was structured as a so-called covenant-lite loan. Banks provided $24 billion of covenant-lite loans to companies at the peak of the bull market for credit in 2006, triple the amount in the previous eight years combined, according to S&P. Boots lenders have only one covenant, which keeps borrowing within a stipulated range relative to cash flow.

``They are being optimistic if they think they can get this away,'' said Alex Moss, who helps manage the equivalent of $200 billion as head of high-yield and leveraged loans at Insight Investment Management in London. ``Just because the market is rallying doesn't mean banks can dump all these low-quality deals back on the market.''

Bankers have set a price to sell portions of the Boots loans as early as next week, the London-based Times reported earlier today, citing unidentified bankers familiar with the matter.

Deutsche Bank separately has sold 200 million euros of loans to TDC A/S back to the Danish telecom operator for between 90 and 95 percent of face value, without consulting the rest of its lending group, the Financial Times reported, citing the Loan Market Association in London.

To contact the reporter on this story: Cecile Gutscher in London at cgutscher@bloomberg.net

Last Updated: April 23, 2008 08:39 EDT