A backlog of nearly $500 billion in outstanding financial deals including leveraged loans to fund private equity buy-outs, delayed initial public offerings and corporate bond issues has built up over the summer because of the market turbulence, The Financial Times reports.
It means this month, traditionally a busy period for deal activity as bankers and investors return from their summer holidays, will be even more critical for financial institutions seeking to boost portfolios or shift loans.
“September is always crowded with deals, but this month will be even more crowded because of a backlog of deals due before the summer break but postponed as a result of the market turbulence,” says Jeroen Berns, European head of equity markets at ABN Amro.
According to the latest figures from Dealogic, the data provider, the amount of deals delayed or stuck in the pipeline has risen to $470 billion.
One analyst said: “The big universal banks such as Citigroup and JPMorgan, which are holding a lot of these loans, can probably absorb losses more easily, but the smaller investment banks such as Goldman Sachs and Lehman Brothers, which also have a lot of loans on their books, need the capital from them to do business in general. If they can’t find buyers for their loans, it means they have less money for other activities.”
Bankers say much hinges on whether some of the biggest deals can be successfully sold to investors in the coming weeks.