Private equity sponsors wary of cheaper loans

Sponsors are suspicious that banks are offering them better rates on leveraged loans in order to give hedge funds a greater share of the deals. David Watts reports

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European private equity sponsors claim banks are trying to gain greater control over the allocation of leveraged and mezzanine loans by offering sponsors the prospect of lower borrowing rates. Market participants speculate that the reason is so that banks can reward hedge funds, frequently among their most profitable clients, with a larger slice of the deals.

As Marc Boughton, a partner at CVC Capital Partners, says: “Arranging banks are beginning to offer differential pricing depending upon the

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