the visible hand

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Concerns growing – leveraged loan sales could be hamstrung

Posted by ecoshift on July 26, 2007

FT.com / Capital markets
Fitch predicts mass loan refinancing
By Saskia Scholtes in New York
Published: July 25 2007

Junk-rated companies that have tapped generous loan markets in recent years could soon face funding difficulties, according to Fitch.

A report by the rating agency published on Thursday predicts that more than half of the $1,300bn leveraged loans market in the US will need to be refinanced in the next three years.

Companies that have low credit ratings have increasingly turned to the loan market for funding at a time of unprecedented liquidity from hedge funds and other non-traditional investors.

Many highly leveraged firms rely on their ability to roll over existing loan debt into new loans rather than repay it when it matures, which they often cannot do.

But refinancing plans could run into difficulty. Concerns are growing that this year’s $200bn pipeline of new leveraged loan sales could be hamstrung by credit market conditions and lack of investor appetite.

At least 20 companies have delayed or canceled new debt sales in recent weeks.

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