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Debt Losses for Buyouts Top $1 Billion and Banks Brace for More

  • Falling debt prices spur writedowns on LBO funding commitments
  • European banks likely to post similar losses next week
Traders on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Friday, April 29, 2022. Technology stocks extended losses Friday as shares of what were once market darlings at the height of the pandemic headed for their worst monthly drop since the great financial crisis.
Traders on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Friday, April 29, 2022. Technology stocks extended losses Friday as shares of what were once market darlings at the height of the pandemic headed for their worst monthly drop since the great financial crisis.Photographer: Michael Nagle/Bloomberg

Chasing leveraged buyout financing business cost the biggest US banks at least $1.3 billion in the second quarter, and more such losses are likely on the way from their European counterparts. 

Six banks including JPMorgan Chase & Co., Goldman Sachs Group Inc. and Citigroup Inc. recorded the paper losses on loans, mostly made to fund leveraged buyouts. Bank of America Corp. led the pack with a $320 million writedown, while Morgan Stanley reported $282 million in losses on corporate loans held for sale, according to earnings posted over the last week.