WSJ Exclusive News |  JPMorgan avoids buyout loan

Sometimes in investment banking, it’s the trades you don’t make.


JPM 0.16%

Chase & Co. has avoided most of the so-called stalled deals in 2022 that have cost competitors billions of dollars in losses. Whether by luck or by design, America’s biggest bank did not make loans securing takeovers of companies such as Twitter Inc., Citrix Systems Inc. and Nielsen Holdings PLC which fell in value as markets have changed.

JPMorgan’s record contrasts with that of Bank of America Corp., which made big loans for buyers of Twitter, Citrix, Nielsen and others. Bank of America CEO Brian Moynihan does it all the time sounded an optimistic note on the US economy, clashing with that of JPMorgan boss Jamie Dimon darker warnings.

There is one thing Mr. Dimon feels good about — his firm’s low exposure to bad buyout loans, which bankers call leveraged loans.

“There are no real leveraged loan write-offs this quarter and this market has not cleared yet,” Mr. Dimon said on an October conference call with Wall Street analysts. “Our share of it is very small, so we feel very comfortable.”

Target Size (billion) Principal creditors Industry
Citrix Systems Inc. $15.0 Bank of America, Credit Suisse, Goldman Sachs technology
Twitter Inc. 12.5 dollars Morgan Stanley, Bank of America, Barclays Media
Nielsen Holdings Plc 10.3 dollars Bank of America, Barclays, Mizuho, ​​Ares Media
Tegna Inc. 7.7 dollars Royal Bank of Canada, Bank of America, Goldman Sachs Media
Tenneco Inc. $5.5 Citigroup, Bank of America, Barclays Automotive
Lumen Technologies Inc. 4.9 dollars Barclays, Bank of America, Goldman Sachs Telecommunications
William Hill $2.1 Morgan Stanley, JPMorgan, Mediobanca Games
BBB industries LLC $1.6 JPMorgan Automotive

Note: Amount includes loans and bonds.

Source: LevFin Insights

Competitors attribute JPMorgan’s absence as a major deal lender in 2022 to a weakened relationship with private equity firms in recent years. The bank also served as an adviser on some of the mergers, such as Nielsen, which prevented it from making loans, they said.

JPMorgan ranks fourth among U.S. bond and loan buybacks this year, while Bank of America is third, according to Dealogic data. JPMorgan’s average rank over the past 10 years is seventh, compared to its average rank of third in the previous decade.

JPMorgan is also grappling with the fallout from some relatively recent buyouts that have soured, such as the loans it made backing its purchase of sports betting company William Hill International. Still, it has far fewer pending deals on its balance sheet than competitors, leaving it with more cash to win new business.

Private equity firms, corporations and individuals who acquire companies often pay in part with loans made by investment banks to the businesses they buy. Banks seek to offload debt to fund managers for more money than they lent, pocketing the difference.

Foreclosure loans represent only a small portion of total U.S. lending, and financing them does not necessarily mean that a bank is exposed to unusual risk.

However, the strategy has backfired this year for firms such as Bank of America, Barclays PLC, Goldman Sachs Group Inc. and Morgan Stanley, which committed over the winter and early spring to financing major takeovers. Interest rates subsequently rose, making debt investors wary and sending the price of leveraged loans tumbling. Banks now have to choose between liquidating the loss-making loans or keeping them on their balance sheets at discounted prices.

JPMorgan’s global head of corporate debt, Kevin Foley, was a mid-level banker during the 2008 credit crisis, when the bank was awash in failed deals. JPMorgan was the lead lender in the acquisition of JC Flowers & Co. for $25 billion of student loan lender Sallie Mae, which was eventually canceled, and Cerberus Capital Management LP a troubled purchase of automaker Chrysler.

Mr. Foley shifted from making loans to restructuring them, battling other lenders — often hedge funds — to recover as much money as possible from companies in bankruptcy court. He worked on some of the era’s most controversial workouts, including auto supplier Lear Corp. and newspaper publisher Tribune Media Co.


Do you think JPMorgan’s or Bank of America’s strategy is better this year? Why? Join the conversation below.

This time, JPMorgan has reduced its appetite for buying loans in the fall of 2021, people familiar with the matter said. Mr. Foley and his team believed that the price inflation then emerging in the U.S. would persist for years because of supply disruptions and wage inequality, the people said. They also see risk rising in foreclosure deals as rising valuations force buyers to take on excessive debt to make winning offers, the people said.

In January, Vista Equity Partners and the private equity arm of Elliott Management Corp. won the redemption of cloud computing company Citrix Systems with a $16.5 billion bid. Bank of America, Credit Suisse and Goldman Sachs committed to finance most of the purchase with $15 billion in debt. By September they and other banks have taken a total of $500 million in losses on paperThe Wall Street Journal reported at the time.

Write to Matt Wirtz c [email protected]

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