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Yikes, the article on the front page of the WSJ today hints at the pending write downs of debt that may be coming for banks. The Home Depot Supply story is quite alarming as we see an 18% reduction the value from just two months ago due primarily to the tightening credit market. The terms are also not what they used to be, as the debt now actually has covenants and guarantees - shocking - that a borrower might actually be on the hook for the loan. Yet, the primary significance that the article highlights is that "if the banks can't sell the debt in bond markets, and it sits on their balance sheet, they have to mark down its value, which some can ill afford to do". Why does it seem that the press is all over private equity when in the end its the terms extended by bankers that truly has overheated the market? It seems that if the banks hadn't agreed to ridiculous terms on many of these deals and had negotiated in the downside protection necessary their wouldn't be near the threat of having to "absorb tens of billions of dollars of write-downs".

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Posted by Brett Suchor at 10:20 PM | Permalink | Comments (0) | TrackBacks (0)