Magazine article American Banker

Bank Loans Lure Institutional Investors

Magazine article American Banker

Bank Loans Lure Institutional Investors

Article excerpt

Goldman Sachs, Credit Suisse, and Citicorp syndicated a $1.225 billion loan this fall for Allied Waste that included a $500 million piece earmarked for institutional investors, the largest to date.

That loan, which was eventually increased to $1.275 billion, is the latest evidence of the increasing appetite for bank loans among institutional investors: insurance companies, prime-rate funds, sophisticated private investors, even other banks.

"Institutional investors have clearly achieved the mass to broaden their influence in the syndications market," said Stephen Ceurvorst, the head of syndications at Mellon Bank, Pittsburgh.

In the first nine months of this year, institutional investors purchased a record $9.74 billion in bank loans - more than 14 times the level in 1992, and 9.3% of total leveraged lending volume, according to data from Loan Pricing Corp., New York.

And institutional investors' interest in bank loans shows no signs of abating. This year, Oak Hill Partners and Keystone Inc. formed a $1.75 billion fund to invest in bank loans, high-yield bonds and distressed securities.

"There's an increased amount of capital that's being assembled to invest" in bank loans, said Glenn R. August, a portfolio manager at Oak Hill. "The question is whether there will be quality supply to invest in."

So far, Mr. August said, there's been enough product to meet the demand, but the immediate horizon appears to be challenging.

"You have a lot of money chasing a limited supply of goods at the moment," said Mark R. …

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