Scotia Capital sold $50 million of loans in the past two weeks as part of a housecleaning effort before its year-end on Oct. 31. Scotia first auctioned off an approximately $25 million piece of Interstate Bakeries' pro rata tranche and then followed it up with a second $25 million piece of power plant La Paloma's bank debt at 94 1/2.
Market participants pointed to J.P. Morgan as the buyer of Interstate, while Credit Suisse First Boston placed the cover bid in the 98-98 1/2 range. A Scotia spokesman declined comment on any specific transactions, but he said that amount is very small compared to Scotia's average assets and that he would not characterize it as cleaning the balance sheet. J.P. Morgan and CSFB officials declined comment.
As fiscal year 2004 is coming to an end for the Canadian banks, other banks north of the border could start selling off their exposure, a trader said. However, given the low number of significantly distressed credits, the amounts are not expected to be as considerable as previous years. "There are not very many names going into the workout groups," the trader noted. He said some automotive companies could be potential loans that banks should start selling.
Another trader noted that some banks work differently when it comes to the end of their fiscal year. Some accounts want to sell after year end, some before. "It's just an issue of when you want to take your losses," he said.