Nothing says recovery like par

October 19, 2009

It’s not there yet, but the derivatives index that references leveraged loans – the debt of choice for big corporate buyouts during the boom – is just a few cents away from par.

The new, cleaner Markit LCDX index that launched earlier this month is already at 98 1/2 cents, while the older series 10 that included such bad boys as bankrupt General Growth Properties, is trading a little over 97 cents. Astonishing really, considering the series 10 tanked to below 80 cents last year.

Such lofty levels are sure to entice new deals since companies hate to pay a discount when raising funds. Makes you wonder if new collateralized debt obligations are around the corner.

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