Banks sell $9.4B in loans for First Data - report

LONDON (CNNMoney.com) -- Wall Street bankers sold $9.4 billion in loans to finance the leveraged buyout of First Data Corp. on Thursday, according to a published report.

The Wall Street Journal said it was the biggest leveraged loan sale since HCA last year and the amount sold was nearly double the $5 billion investment banks had initially said they were trying to sell.

The deal is a major boost for the corporate debt market, which has been hit by a wave of risk aversion among investors. The First Data loan sale has been widely considered a crucial test for the market and could pave the way for other debt deals.

Despite the sale, the banks that committed financing for the First Data deal - which includes Citigroup (Charts, Fortune 500) and Credit Suisse (Charts) - are still holding most of the $24 billion of debt needed for that deal on their books, the report said.

The First Data loans bear an interest rate of 2.75 percentage points above the London interbank offered rate, which comes to about 8 percent, the newspaper said. Most of the loans were sold at a discounted price of 96 cents on the dollar, which means investors will end up earning interest of about 8.73 percent on the loans, it said

Investors have been pushing back on loose lending terms and demanding to be better compensated for putting their money at risk, which has been part of the difficulty banks have faced in trying to get this debt off their balance sheet.

There's an estimated $300 billion of risky loans and bonds that banks provided during the height of the leveraged buyout boom and which now need to be sold. The First Data deal has reduced that pipeline, but still poses a challenge, the Journal said.