BROWSE BY TOPIC
Stories of Interest
- Credit Suisse Fully Compliant on Sanctions: CEO
- Ex-UBS Metals Trader Beats Spoofing Conspiracy Charge
- Investment Advisor, WCAS Management Corp, To Pay Nearly $800K Over Conflicts of Interest
- Altaba, fka Yahoo!, to Pay $35Mn for Failing to Disclose Massive Cybersecurity Breach - SEC
- SEC Formerly Bars Martin Shkreli from Industry
- HF Billionaire Steve Cohen Buying Into Fintech Start-Ups
- Deutsche Bank Is Weighing Massive Cuts in Its U.S. Cash Equities Unit
- Richard Jenrette, Co-Founder of DLJ Investment Bank, Dies at 89
- Goldman Sachs Makes First Hire in Cryptocurrency Markets Unit
- Special FINRA Election to Fill Large Firm Governor Vacancy
- Chicago-Based Investment Adviser Sentenced to 151 Months in Prison - SEC
- Dun & Bradstreet Hit With FCPA Violations - SEC
- SEC Charges Additional Defendant in Fraudulent ICO Scheme
- Warren Buffett Simply Blew it on Wells Fargo Stock: Dick Bove (Video)
- Barclays and Deutsche Bank to Lag U.S. Trading Peers
- NY AG Schneiderman Seeks to Close Loophole That Could Let Trump Pardons Block State Charges
- 'Fearless Girl' is Moving to NYSE After Year Staring Down 'Charging Bull'
- What's In Your Wallet - American Express Shares Soar After Earnings Release
- Deutsche Bank's Executive Departures Continue Following Change in CEO
- Reflections of an Economist Commissioner (SEC's Piwowar)
We seek to provide information, insights and direction that may enable the Financial Community to effectively and efficiently operate in a regulatory risk-free environment by curating content from all over the web.
Stay Informed with the latest fanancialish news.
NEWSLETTERS & ALERTS
Wall Street News
Jumping on the Leveraged Loan Wagon
Bloomberg News and, more recently, the WSJournal have reported that investors are desperate for higher yields in a low-rate environment. This, in turn, has created a leveraged-loan frenzy that Wall Street’s largest banks like Goldman Sachs and Bank of America are more than happy to accommodate. Loan sales are running ahead of the pace of years past and investors – both individual and institutional – are piling back into U.S. funds that specialize in loans.
So, what is ‘Leveraged Loan’? According to Investopedia.com, a leveraged loan is extended to companies or individuals that already have considerable amounts of debt. Lenders consider leveraged loans to carry a higher risk of default, and as a result, a leveraged loan is more costly to the borrower. Leveraged loans for companies or individuals with debt tend to have higher interest rates than typical loans; these rates reflect the higher level of risk involved in issuing the loan.
Breaking Down 'Leveraged Loan. In business, leveraged loans are also used in the leveraged buyouts (LBOs) of other companies. A leveraged loan is structured, arranged, and administered by at least one commercial or investment bank. These institutions are called arrangers and subsequently may sell the loan, in a process known as syndication, to other banks or investors to lower the risk to lending institutions.
A Leveraged Loan - FKA a 'Junk Bond'. There's no exact criteria for defining a leveraged loan. Some market participants base it on a spread - e.g., where loans pay a floating rate, typically based on LIBOR plus a stated interest margin - if the interest margin is above a certain level, it is considered a leveraged loan. Others base it on the rating, with loans rated below investment grade, which is categorized as Ba3, BB- or lower from the rating agencies Moody's and S&P.
S&P's Leveraged Commentary & Data (LCD), which is a provider of leveraged loan news and analytics, places a loan in its leveraged loan universe if the loan is rated BB- or lower. Alternatively, a loan that is nonrated or BBB- or higher is classified as a leveraged loan if the spread is LIBOR plus 125 basis points or higher and is secured by a first or second lien.