The buying spree has provided something of a lifeline for banks, though. The Morrisons and Apollo deals were underwritten before the recent jump in interest rates and lenders including Goldman Sachs faced having to keep the risky debt on their balance sheets.
Pimco could also get stuck with that debt if the price doesn’t recover, but it can spread the risk out over multiple funds, according to Noel Hebert, director in credit research at Bloomberg Intelligence.
“You buy at a price that fits your view of the credit,” Hebert said. “Pimco, given its size, needs to be able to put a lot of money to work, so these purchases are a good opportunity for them.”
--With assistance from Tasos Vossos, Lisa Lee and Stephan Kahl.
This article was provided by Bloomberg News.