Arrangers provide the time-honored role that is investment-banking of investor

Arrangers provide the time-honored role that is investment-banking of investor

KKR’s $25 billion purchase of RJR Nabisco had been the– that is first continues to be the many (in)famous – of this high-flying LBOs. Struck through the loan market’s days that are formative the RJR deal relied on some $16.7 billion in loan financial obligation.

You start with the big buyout that is leveragedLBO) loans of this mid-1980s, the leveraged/syndicated loan market is just about the principal means for business borrowers (issuers) to touch banking institutions along with other institutional money providers for loans. This is because easy: Syndicated loans are more affordable and more efficient to manage than old-fashioned bilateral – one company, one loan provider – credit lines.

dollars for an issuer needing money. The issuer will pay the arranger a charge for this ongoing solution and, obviously, this charge increases using the complexity and riskiness for the loan.

The most profitable loans are those to leveraged borrowers – those whose credit ratings are speculative grade (traditionally double-B plus and lower), and who are paying spreads (premiums above LIBOR or another base rate) sufficient to attract the interest of nonbank term loan investors, (that spread typically will be LIBOR+200 or higher, though this threshold rises and falls, depending on market conditions) as a result. Read more of this post