The decision today by British Land plc to pull its £1.7bn Meadowhall sale offers a counterpoint to the FT story reporting big banks’ linked financing deals aimed at clearing some of the $200bn of leveraged buy-out debt they carry. Besides the obvious that the excess leverage / high valuations partnership looks to have been carried too far it also demonstrates an encouraging market clearing mechanism – zealous regulators take note.

In fact, they have. Of these developments one is reported by the FT to have said, "When we start seeing innovation on how to fix the problem and bring in new investors, it will be a good sign that things are turning".

Whatever the accuracy of the latter part of that statement, this particular mechanism is not an innovation: during the 1980s savings and loans (S&Ls) crisis a variant was used (with some success) to convince desperately-seeking-deposits thrifts to take on what, in some cases, they failed to spot were toxic syndicated junk bond packages (ie take this cash but buy some junk from us). Then it was the likes of Wall Street-wise Michael Milken doing the convincing; and the by comparison provincial S&L boards were often too willing to believe the supposed merits of the deal.

This time the negotiators looked evenly matched which, with luck, will keep all bank balance sheet transactions economically genuine.

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