Subprime collapse ‘puts buy-outs on hold’

Source: Stock Market Digital

Date :03/08/2007 09:16:07

Leading bankers yesterday moved to calm the global markets as they admitted that the fallout from the US subprime collapse could put private equity deals on hold for the next few months.

Shares in European and US banks have slumped in the past week as investors have fretted about their exposure to subprime-related losses as well as leveraged loans stuck on their balance sheets, the FT reported.

Analysts estimate large banks have underwritten loans worth $300 billion to finance deals not yet been completed.

The newspaper reported that Bob Diamond, Barclays president, predicted the consequences of the subprime collapse could take more than a year to be resolved.

However, he also said the leveraged loan market should recover more quickly: “We would expect at some point over the next two to three months to see that market at more normal volume levels.”

Institutions with direct exposure to the subprime market continue to suffer, the FT reported.

AXA Investment Managers, the investment arm of the French insurer, fell victim to the subprime fallout when it took the unusual step of bailing out investors in two of its US funds after they suffered losses on subprime mortgages.

However, the FT reported that credit markets in the US and Europe rebounded slightly after banks took a loss to complete the sale of $8 billion in loans for the financing arm of car manufacturer Chrysler.

August 3 2007