Tuesday, April 08, 2008

Amazing place, Wall Street!

After taking a $9.4 billion write down, John Mack of Morgan Stanley feels the US financial crisis is getting close to its bottom. As a strategic measure, Mack also vowed Morgan Stanley would “keep its powder dry” and steer clear of large acquisitions to preserve capital and liquidity. He expects the turmoil to stretch thro a couple quarters ahead.

Meanwhile Citigroup is nearing a deal to sell $12bn in leveraged loans at a discount to a group of leading private equity firms, marking another step in new chief executive Vikram Pandit’s efforts to shrink the beleaguered bank’s balance sheet. Although details of the deal were still being worked out, people familiar with the matter said Apollo Management, the Blackstone group and TPG would buy the loan portfolio at a discount that could come in at about 90 cents on the dollar.

The Citi portfolio includes loans used to finance acquisitions by Apollo, Blackstone and TPG, as well as debt in their rivals’ deals. Apollo would buy about half the portfolio, with Blackstone and TPG taking the rest.

Isn’t that terrific? When times are good, PE firms go ahead and raise leveraged debt from banks. When the banks go bust, they turn around and buy distressed debt including some of their own. Wall Street is full of surprises!

Labels: ,


Post a Comment

<< Home