(1888PressRelease)
September 04, 2007 - Banks need to sell "a year's worth" of debt financing to other investors before they can finance new deals and kickstart the stalling European private equity buyout sector, it has been reported.
According to Matthew Craston, joint head of leveraged loans at European Credit Management, a number of mistakes have been made which has led to the current status quo.
"There is a $100 billion (£49.7 billion) pipeline of deals [in Europe] that needs to be sold... This represents a one-year supply of deals, some of which with the benefit of hindsight were done at the wrong price, the wrong structure and the wrong covenants," he told the Independent.
"They will have to be repriced."
However, Mr Craston believes that banks may have difficulty in selling on this debt due to a lack of interested buyers - especially given the current turmoil in the credit market.
"Everything has absolutely hit the buffers," a banker told the same publication.
"It's like a python that swallowed an elephant. There's serious indigestion."
The problem could be solved, Mr Craston speculates, if the banks sell on the higher grade debt but retain the more uncertain aspects.
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