On Wall Street, “backing up the truck” can refer to taking advantage of an excellent buying opportunity. Pimco, the $1.8tn California-based money manager, has bought more than €1bn worth of loans from Barclays and Bank of America. These helped fund the leveraged buyout of the Worldline payments terminals business.
Banks fancy themselves to be in the moving business, not the storage business. They commit financing to LBOs and then syndicate this bridge debt to specialised buyers typically in the form of both loans and bonds. The fees they charge and the pricing range they offer to private equity groups should mitigate any credit risks from interest rate and credit spread volatility.
Banks have struggled this year to unload bridge loans that they pledged on deals announced before credit markets went all wonky. Leveraged loan prices have drifted down to about 90 cents on the dollar, pushing up effective annual yields to around 10 per cent. Opportunistic investors such as Pimco see a balancing of risk and reward in fixed-income markets, enabling it to solve the problems of these two banks — at the right price.