Pacific Investment Management Co. spent some of last year scooping up debt that banks couldn’t sell at knock-down prices. Now it’s started to slowly offload some of those positions at double-digit premiums.
After scooping up more than €1 billion euros ($1.1 billion) of loans backing an acquisition by Apollo Global Management Inc. last year at 85 cents on the euro, Pimco has been selling small blocks in the mid to high 90 cents range, according to people familiar with the matter.
The Newport Beach, California-based fund manager has sold at least €55 million of the debt so far, filings show. The firm has continued to approach fund managers about buying more of the debt in the mid to high 90 cents range in recent months, some of the people said.
The funds that have snapped up Worldline have bought them for their collaterlized loan obligations, in some instances, the people familiar said.
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Pimco injected around $2 billion last year into leveraged debt backing consumer companies that banks had struggled to offload to cautious investors, betting that the prices would eventually rebound. As well as buying the debt backing Apollo’s acquisition of Worldline SA’s payment terminals unit, the bond giant also bought more than €1 billion of bonds and loans backing the unsuccessful sale of British grocery chain Morrisons.
A spokesperson for Pimco declined to comment on the firm selling its position in Worldline.
Last year, the world’s largest banks were forced to take large writedowns on debt-fueled mergers and acquisitions they had underwritten late in the cheap-money era. It allowed funds with deep pockets to pick up the debt at deep discounts, with the potential to keep it on their balance sheets and hope the company can eventually repay in full, or flip it at a profit.
Still, large blocks of debt can be hard to trade in illiquid markets such as leveraged loans, making substantial sales more challenging.
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Author: Laura Benitez and Irene García Pérez