Banks Whip Out Checkbooks for Leveraged Buyouts as Rates Fall
- Lenders tell sponsors that they can borrow over $15 billion
- Margins for senior loans are shrinking as competition rises
As the global economy cools, Wall Street’s fee-making LBO machine is starting to crank up again.
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Investment banks, forced to take big writedowns on risky merger and acquisitions loans after a global surge in interest rates, are now jumping back into leveraged buyouts — one of the most lucrative areas in finance.
Traditional lenders and private credit managers are telling private equity firms, known as sponsors, that they can provide more than $15 billion of debt on a single junk-rated deal. That’s about 50% more than last year, according to some market participants, when a number of loans were stuck on lenders’ balance sheets after central banks aggressively hiked rates to tame inflation.