Newspaper article St Louis Post-Dispatch (MO)

Banks Sell Loan-Backed Bonds

Newspaper article St Louis Post-Dispatch (MO)

Banks Sell Loan-Backed Bonds

Article excerpt

NationsBank Corp. tops a growing list of banks preparing to sell some $12 billion of bonds backed by corporate loans this month. The aim is to free cash for more profitable lending while demand for asset-backed debt is strong.

"If banks want to make new loans, they have to get rid of the old ones," said Andrea Lapeyre, director of product development in corporate loan syndication and trading at BancAmerica Securities Inc.

In the corporate loan market, which is expected to reach a record $1 trillion this year, repackaging and reselling the loans is "becoming a very important tool," she said. Until now, banks turned to the asset-backed market mostly to shed auto loans and credit card receivables. Banks also bundled high-risk corporate loans and resold them to investors as securities to make lending portfolios less risky. Now, banks including ABN Amro Bank NV are planning to do the same with less risky, less profitable corporate loans. That way, they can free up the capital they're required to set aside as a cushion for losses on these loans. …

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