The loan market is buzzing with chatter about Credit Suisse Group's move to sell its 15% of the $7.2 billion loan backing Apollo Management LP and TPG's $17.7 billion buyout of Harrah's Entertainment Inc. before other banks involved in the syndication. The potential controversy: Did Credit Suisse engage in "front running"; that is, did the bank break the unity that characterizes usual loan syndication efforts? This is a complicated question.
Continue reading below
Although the exact structure of Credit Suisse's transaction wasn't clear, one source says it might amount to little more than a temporary offloading of risk. Speculation swirls that Credit Suisse sold its commitment to credit hedge funds involved a derivative trade, likely with a put option. As the source describes it, the deal may have involved Credit Suisse agreeing to sell the loans, but giving buyers the option to sell them back to it at an agreed-upon price. What that means from an accounting perspective is murky, but a knowledgeable source notes that a put would likely only be used if the market falls further, meaning the loans would come back onto Credit Suisse's books at the worst possible time. This is still developing. - Vipal Monga
See Dealscape: Harrah's deal closes
See Dealwatch: Harrah's
