Leveraged loans end Q3 in black despite worst week ever, Deutsche says

New York, Oct. 25 - Leveraged loans ended the third quarter with a positive return, albeit a slim one, despite suffering their worst week ever, according to a new report from Deutsche Bank.

For the three months, the Deustche Bank Leverage Loan Index ended up 0.02%, for a return over the first nine months of the year of 3.41%. Over the same period of 2000, the index gained 4.42%.

The slim positive performance came despite a decline of 1.61% in the week ending Sept. 24, the first week of trading after the Sept. 11 terrorist attacks.

Deutsche's report said that decline "easily surpassed" the previous worst, the negative 0.79% seen in the week ending Sept. 28, 1998, during the Russian debt crisis.

In addition to the decline in the week to Sept. 24, leveraged loans lost a further 0.58% in the following week, the final one of the quarter.

Deutsche's report also noted that both primary and secondary leverage loan markets were "virtually shut down" for the remainder of September after the attacks.

"While deals have begun to trickle back into the market, the outlook for the fourth quarter new-issue volume appears cautious," the firm's analysts wrote. "The primary market appears willing to digest only stable industry deals that have a strong credit profile and are properly priced."

Looking at sectors, the best and worst performers were very similar to those in the second quarter, Deutsche said.

As in the previous three-month period, the top three performing industry groups were healthcare, education and childcare; diversified/conglomerate service; and leisure, amusement and entertainment.

Telecommunications was the repeat worst performer and broadcasting and entertainment held on to the third-worst performer position. However chemicals, plastics and rubber ousted mining, steel, iron and non-previous metals for the second weakest place.

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