Is The Syndicated Loan Market On The Edge Of A Major Disruption?

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"All of us [banks] are really in the moving, not the storage, business.”
With those words the world learned yesterday that Credit Suisse had sold off its exposure to three closely syndicated loan deals—the buyouts of Harrah’s, Intelsat and Alliance Data Systems. Many in the syndicated loan business were taken aback that Credit Suisse had jumped the gun and sold off its exposure without consulting other syndicate members. Although the details are unclear, the effect today seems to be that others are following suit, bringing to market debt in a way to some say resembles a panic.
"There's a real panicky feel out there. It's become a game of hot potato," one syndicated loan market veteran told DealBreaker.
There's a lot of sensitivity around this issue, and many market players are declining to comment on it at all. There's talk that Clear Channel loans commitments may be in trouble. We're still digging.
Update: "80 is the new 90" for leveraged loans, FT Alphaville reports. This is putting pressure on CLOs, which are falling through the floor. Banks hold a lot of CLOs, especially the triple A CLOs they thought were the safest bets but may turn out to be worth far less than anticipated. They haven't disclosed much of these positions, according to FT Alphaville, because they were fully hedged. But here's the catch--they were fully hedged with swaps from bond insurers.
"Thus as monolines totter, banks are having to writedown the value of the CDS, and so add CLO exposures onto their balance sheets. Just at the wrong time - as CLOs’ paper becomes more distressed. While losses won’t be realised as severely as with RMBS, rating downgrades to CLO paper may well require banks to stump up extra regulatory capital at a time when they can least afford to," FT Alphaville reports.

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