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Disappearing LBO writedowns…

Among the rather astonishing figures announced by Barclays on Tuesday was a miniscule writedown of just £60m on the bank’s £7.3bn leveraged loan holdings.

“We are very, very proud of it”, said Bob Diamond.

All very interesting in light of what markets for buyout debt derivatives are indicating:

The LevX Senior, an index of European leveraged loan CDS, closed on Monday at 90.75 to par.  The US equivalent, the LCDX, puts a similar valuation on buyout debt derivatives, closing on Friday at 91.10.

Leveraged loans by all accounts, should be worth just over 90 cents on the dollar.

How proud then, are the folks at RBS? The bank announces its results on Thursday 28.

It has an even larger leveraged loan book than Barcap - valued by Credit Suisse analyst Jonathan Pierce at £12bn. So far, the value of those loans has been marked down 3 per cent. Here is RBS’s own roundup of its LBO activities in 2007.

The largest deal RBS worked on - as mandated lead arranger - was ProSiebenSat.1:

Bookrunner and Mandated Lead Arranger in the Leveraged Buyout by KKR and Permira (EUR 3,304m Senior and Subordinated Facilities) and in the Acquisition of SBS Broadcasting by ProSiebenSat.1 (EUR 4,600m Senior Facilities).

ProSieben looks like the proximate cause for the run on Citi hedge fund CSO. The market value of the loan is currently implied at 73 cents on the dollar, making it one of the worst performers in the loan market - and far below the averages implied by the indices.

The question then, is how much of ProSieben has RBS managed to syndicate? The deal was certainly oversubscribed in its early stages, but a subsequent panic caused a selloff. And who - apart from CSO - holds the paper?

This entry was posted by Sam Jones on Tuesday, February 19th, 2008 at 12:03 and is filed under Capital markets, Private equity. Tagged with , , . You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.

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Comments

  1. Feb 19   18:17 Posted by Stacy-Marie Ishmael [report]

    Pedant: Miniscule, while not strictly OED, is considered an acceptable variant of minuscule.

    On this, see those professional pedants at Oxford University Press: http://blog.oup.com/2007/07/spelling/

  2. Feb 19   17:21 Posted by pedant [report]

    minuscule, please.

  3. Feb 19   15:22 Posted by Xtranche [report]

    Bob D should be proud - Barcap have syndicated some gems that now trade in the 60s. As for the “par loans” sitting on the books of Barcap and RBS - ask them how much appetite is out there for £ assets.

    Ross W - good to see you back in action.

  4. Feb 19   14:20 Posted by pooh bear [report]

    @ RW. I agree that might be the case for loans the bank has purchased for its portfolio - however NOT on deals they have underwritten with intention to sell - those should be MTM

  5. Feb 19   13:36 Posted by Ross Williams [report]

    Just because leveraged loans trade, doesn’t mean commercial banks have to mark them to market . “Loan loss provisions” take into account banks estimations as to losses given default. If banks marked to market loan portfolios the business of lending would now be extinct.

  6. Feb 19   13:26 Posted by pooh bear [report]

    fyi prosieben not a hung deal - managed to syndicate that as it closed and went free to trade in June (before everyone started backing out) big hung deals include: Boots, EMI, AA/saga, NGW, Endemol, Algeco, Foxtons etc etc etc

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