Banks are whittling down a pile of unsold loans that backed private equity buyouts in the cheap-money era and trying to avoid heavy hits by refinancing the debt or selling chunks in secondary markets, bankers and investors said, Reuters reported. The stock of unsold loans in Europe is now less than 5 billion euros ($5.4 billion) from around 15 billion euros in the third quarter, two bankers estimated. Until the loans are offloaded, banks' capacity to underwrite new large buyout financing is limited, holding back mergers and acquisition (M&A) activity that slumped 27% in Europe last year. Some banks are now selling new loans to investors to repay existing debts that were on their books and linked to M&A deals. This was recently the case with French IT services firm Inetum, acquired by private equity (PE) house Bain Capital last July, one of the bankers, a third banker and an analyst said. Earlier this month, Inetum's banks led by BNP Paribas and Credit Suisse sold a roughly 343 million euro loan to investors to repay an original facility kept on their books, they said. Public debt markets were frozen for much of 2022 due to war in Ukraine and aggressive rate hikes globally, so banks changed the structure of such loans and moved them from their trading to banking books to avoid having to mark down the loans and take a loss.
