RLPC-Leveraged loans surge on reduced supply backlog

NEW YORK, April 18 (Reuters) - Secondary prices for leveraged loans rose 25 to 50 basis points on Friday, helped by a falling backlog of leveraged buyout debt, slim new issuance and rallying stocks, traders told Reuters Loan Pricing Corp.

The positive market sentiment was also reflected in falling default protection costs on leveraged loans, as measured by the the LCDX index. The new Series 10 LCDX index traded in the 99.12-to-99.22 range, up almost 1 point from Thursday, sources told Reuters LPC.

The firmness in loans has much to do with the fact investors have few new loans to invest in, one dealer said. Investors are putting their money to work in the secondary market, where they can buy performing loans at deep discounts.

Collateralized loan obligations, which have quarterly pay-downs and have to put cash to work, are among the buyers, said another source.

Banks' gradual reduction of a large overhang of loans for leveraged buyout financings is contributing to the positive tone.

Citigroup (C.N: Quote, Profile, Research), for example, has successfully closed on the sale of about $12 billion of LBO loans, its chief financial officer Gary Crittenden told Reuters on Friday.

Earlier this week, Deutsche Bank (DBKGn.DE: Quote, Profile, Research) sold $5 billion of LBO deals to a group of U.S. private equity firms

First Data Corp's loan, which Citigroup was heavily exposed to, was quoted on Friday at 94 cents on the dollar, up from 93.5 cents on Thursday.

Freescale Semiconductor's term loan traded in the 84.75-to-85.75 cents-on-the dollar range, up from 84 to 85 cents.