With banks still holding LBO loan inventory that they’d like to be rid of, and recent sales requiring seller financing, it’s no surprise that loan prices continue to decay.
From the Financial Times:
The value of leveraged loans fell to record lows during the past week, creating further potential mark-to-market losses for both investors and banks.The average bid on the most traded US leveraged loans dropped 330 basis points to an all-time low of 84.28 per cent of face value, according to data from Standard & Poor’s LCD and Markit.
The average bid for Europe’s most traded leveraged loans fell to its lowest level in seven months but, across a broader range of loans, the average price also fell to a historic low….
Simon Hood, joint head of leveraged loans and mezzanine debt at European Credit Management, said: “With renewed volatility in the stock market and concern about the economic situation, a dawning of reality that the economy will get worse has taken over and we have seen a drift downward of prices, accentuated by recent events.”
The spread between the price at which traders were quoting bids and offers nearly doubled, indicating a level of uncertainty and illiquidity not seen since last August when the credit crunch hit.
Mr Hood said buyers were sitting on the sidelines awaiting stability before investing.
He said: “We are seeing some senior secured debt trade below 50 cents and some of the flow names [most traded loans] in the low-80s, which is extraordinary, presenting a buying opportunity”…..
While the fall in loan prices threaten losses for banks that mark to market, banks’ funding needs are the main concern, according to Matt King, a credit strategist at Citigroup, particularly as much of the backlog of leveraged loans that had been weighing on banks has been reduced.
Anonymous 
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I've always felt that the LBOs were going to be next on their balance sheets.
So why don't we just let them hold the toxic waste at a made up price until their balance sheets are repaired enough to take the full write down?
Wouldn't it be easier & cheaper if they just suspended mark-to-market accounting "temporarily?"
It's better than having the Treasury buy all this stuff at par at the TARP.