Major banks such as Bank of America and Barclays PLC (LSE:BARC) are showing reluctance to lead financing for riskier buyouts this year, concerned that such loans could become liabilities on their balance sheets, according to the Financial Times.
This caution follows challenges the banks faced last year in offloading debt related to high-profile acquisitions, including Elon Musk's purchase of Twitter, the paper added.
Bank of America has notably dropped from fourth place in 2021 to 22nd in leveraged buyout (LBO) loan and high-yield bond underwriting league tables, while Barclays has fallen from third to 15th.
The hesitancy among traditional banks has led to a rise in loans directly arranged by private credit funds, limiting the pool of potential lenders for large takeovers.
This shift could deprive banks like Bank of America and Barclays of lucrative origination fees and secondary trading opportunities.