Wall Street Faces Billion-Dollar Losses on Sinking Buyout Debt
Investment bankers in the US and Europe are bracing for potentially billions of dollars in total losses on big-ticket leveraged buyouts as they struggle to offload risky corporate debt that’s plunging in value amid a sweeping market selloff.
The biggest hit, which could amount to about $1 billion, may come from the take-private of Citrix Systems Inc., which a group of lenders led by Bank of America Corp., Credit Suisse Group AG and Goldman Sachs Group Inc. signed in January, according to people with knowledge of the deals and the terms at which banks underwrote them.
Each of the three lead banks could face losses in excess of $100 million, said the people, who asked not to be identified when discussing private transactions.
With the Federal Reserve rushing to hike interest rates at the fastest pace in decades, credit risk premiums are surging far beyond levels banks had negotiated with private equity firms during the halcyon days of cheap money.