A prime example of this predicament is the Alliance Boots deal. The underwriting banks are stuck with £9 billion ($18 billion) of debt issued to finance the retailer’s takeover by Kohlberg Kravis Roberts. It’s even worse in the TXU case, where Citi and JPMorgan and four other banks have been saddled with $26.1 billion of debt.
Hedging this risk effectively has become a real challenge. Using single-name credit default swaps to hedge is almost impossible because spreads are wide and liquidity has dried up.
Access intelligence that drives action
To unlock this research, enter your email to log in or enquire about access
