RISK: Banks seeing big losses from leveraged loans

A potentially higher interest rate has caused investors to step back

As investors grow skittish, Wall Street firms selling corporate debt are seeing heavy losses, which analysts say could exceed $600 million.

Banks are losing a lot of money on leveraged loans, in which they loan money to companies with junk credit ratings. They then try to sell the loans to mutual funds, hedge funds and other investors who often see higher returns on the loans than on less risky debt.

A potentially higher interest rate has caused investors to step back.

And if banks are forced absorb those losses, they may be less likely to lend for acquisitions, affecting M&A activity across industries.

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Transcontinental Media G.P.