Banking & Capital Markets

Bank of America Tops Leveraged-Loan Business

Such high-risk, high-yield loans make up about a third of the U.S. market for syndicated lending.
Stephen TaubJuly 1, 2004

Bank of America Corp. is the new king of the leveraged loan market. The bank vaulted over JP Morgan Chase & Co. as the top arranger of the lesser-known, but booming, market, according to Bloomberg rankings.

Leveraged loans, which are made to companies without investment-grade credit ratings, account for about one-third of the U.S. market for syndicated lending this year, up from about a quarter in the same period a year ago, the news service reported. Banks sell the high-risk, high-yield loans in pieces to institutional investors.

Banks arranged $161.3 billion of U.S. leveraged loans in the first half of this year, up 69 percent from the same period a year ago, Bloomberg also said.

The business is even better than it seems, since fees could be 10 times higher than those on investment-grade loans, it added.

Bank of America’s total was helped by its first-half acquisition of FleetBoston Financial Corp. For whatever reason, however, Bank of America arranged 21.2 percent of leveraged-loan deals in the first half of the year, up from 19.9 percent in the first half of 2003, according to Bloomberg.

Altogether, the bank as managed 185 leveraged loans this year, for a total value of $34.3 billion. J.P. Morgan, which led the market from 2000 to 2003, managed 83 deals.

The largest leveraged loan deal of the year so far is the $3.25 billion term loan for Charter Communications Inc., arranged by Bank of America and J.P. Morgan. In fact, this is the biggest-ever deal syndicated to institutional investors, according to Bloomberg.

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