Active portfolio cleansing among larger banks is producing a developing market for small credits that have rarely--if ever--traded but are now getting attention from dealers and investors. Market players are reluctant to name specific credits for fear of tipping others, but many are in the industrial, manufacturing and textiles sectors, investors said. Those sectors are attractive because they offer relatively high recovery values. "They have reasonable collateral and solid asset bases, which provides more comfort than information technology or services companies," said Art Zimmer, senior v.p. and leveraged loan portfolio manager at OppenheimerFunds. "If you're a secured lender, your ultimate recovery is what you get for the collateral." Dealers said six banks, most prominently BANK ONE and Bank of America, are cleaning their balance sheets and eliminating lesser-known credits. "Half of it you've never heard of before. It's up to you to do the leg work," the dealer said. "This is called making money the old-fashioned way: Instead of buying something and hoping it trades up, you buy it and create a market for it." A spokesman at BANK ONE confirmed that the firm is actively managing its loan portfolio and eliminating minimally performing credits. A spokeswoman at B of A also confirmed that the firm has been cleaning its balance sheet and has sold off $800 million in nonperforming credits year-to-date. She declined to name any of the credits being sold. Zimmer said now is an opportune time for investors, and agreed lesser-known credits are beginning to seep into the market as a result of portfolio cleaning. One dealer noted that the appearance of "no-name" credits is a boon for smaller desks. While big desks are focused on managing the staple credits, smaller shops can jump in on a ripe opportunity to pick up the lesser-known deals. "There are definitely a good deal of names out there that nobody's ever heard of," he said. "The big names don't have the time to deal with it."
'No Name' Credits Getting First Looks In Secondary Mart