Investment banks are offering finance to “vulture funds” on improved terms if the money is used to buy debt from them, according to bankers and managers of the funds. Banks keen to shift a backlog of well over $200bn of LBO debt are tying leverage to the sale of the debt for recovery, or vulture, funds run by hedge funds and private equity. The financing amounts to a hidden discount, allowing the banks to minimise public discounts on LBO debt they are forced to sell at below face value. But it could help to clear the debt hangover, which is weighing on banks’ willingness to make new loans.
