Moody’s comments on US investment banks’ exposure to dislocation in leveraged loan market
The leveraged loan commitments of the major US investment banks (BSC, GS, LEH, MER, MS) do not have negative rating implications at this time, says Moody’s Investors Service in a new report. Firms have sufficient liquidity to fund their commitments, while continuing to maintain strong liquidity profiles, and the earnings impact of marking down the commitments to reflect today’s wider credit spreads should be manageable.
“Firms maintain a strong cash capital and overall liquidity position to deal with the funding risks presented by the challenging conditions in leveraged loan distribution,” says Moody’s Senior Vice President Peter Nerby.
“Furthermore, we believe that they have sufficient earnings strength and diversification to be able to absorb the necessary mark-downs on the loan pipeline while still generating positive, albeit depressed, earnings and a respectable level of profitability.” — www.theasianbanker.com (August 30 2007)–