Canceled TV deal cuts one loan cord

Boardroom is seen in an office building in Manhattan, New York City
A boardroom is seen in an office building in Manhattan, New York City, New York, U.S., May 24, 2021. REUTERS/Andrew Kelly/File Photo

NEW YORK, May 23 (Reuters Breakingviews) - Banks can tune out one painful summer rerun. Television broadcaster Tegna (TGNA.N) on Tuesday terminated its sale to hedge fund Standard General, letting banks off the hook for $8.2 billion in debt backing the deal. While that clears some of the so-called hung loans weighing on balance sheets, it’s too soon for a leveraged-finance reboot of “Happy Days.”

A procedural move by federal regulators would have tied up Tegna’s takeover, first signed in February 2022, long past the date at which debt commitments from Royal Bank of Canada (RY.TO), Bank of America (BAC.N) and many others expired. In the interim, the U.S. Federal Reserve has raised interest rates and markets have slumped. Banks generally sell buyout loans to investors rather than holding them; offloading such debt now would incur losses, as Morgan Stanley(MS.N) made clear when it marked down its held-for-sale loans by $356 million in the fourth quarter.

As a result, Standard General couldn’t finance its transaction. Chipping away at the $25 billion-plus pile of hung loans potentially frees banks up to start fresh. The snag is that investors are skittish about buying lower-rated debt and buyout firms are playing mega-lenders against private credit shops such as Blackstone’s (BX.N). Wall Street will have to keep waiting before they can binge leveraged loans again. (By Jonathan Guilford)

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