Debt fears heighten in US and Europe by Michael Mackenzie and Henny Sender
Fears about corporate and commercial property debt reached new heights in the US and Europe on Friday as investors liquidated holdings in a sign of spreading credit turmoil. The markets were gripped by worries that economic weakness would affect corporate profits, leveraged buy-outs and commercial property. This represents an escalation of the crisis that began with concerns about US subprime mortgages.
Hedge funds that bet on the likelihood of buy-out deals happening have been among the casualties. The turmoil has also put pressure on banks and other investors who are holding $200bn (£103bn) of leveraged loans that they had been hoping to sell. Kevin Cronin, portfolio manager at Putnam Investments, said: “The overhang of bank debt from last year’s leveraged buy-out activity is becoming more problematic. “Loans are being liquidated at distressed prices and banks are looking to reduce risk.”
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