Why Banks Face Billions in ‘Hung Debt’ as Deals Cool: QuickTake

One of the most lucrative transactions in investment banking has suddenly become a very expensive headache for US and European banks. They’re facing big potential losses from about $80 billion in acquisition debt that they promised to raise to facilitate mergers and leveraged buyouts when financial conditions were better. The likes of Bank of America Corp., Credit Suisse Group AG and Goldman Sachs Group Inc. could each face a $100 million hit on the so-called hung debt from just one such financing deal alone. It’s not the first time banks have been burned when what’s known as committed financing ...