Banks Eat Private Equity Debt (JPM)(GS)

Bloomberg is reporting that JP Morgan (JPM), Goldman Sachs (GS) and several other large investment banks have had to keep $11 billion in private equity debt.

“The banks have had to dig into their own pockets to finance parts of at least five leveraged buyouts over the past month because of the worst bear market in high-yield debt in more than two years”, data compiled by Bloomberg show.

Some of the deals that have yet to be funded include TXU (TXU) and First Data (FDC)

If the problem become more severe, it is certainly not out of the question that several money center banks and investment firms would have to take large hits to their P&Ls. Beyond that that big question is what occurs if one of the big private equity deals simply fall apart. Beyond lawsuits that is.

Douglas A. McIntyre