Rising prices in the secondary loan market and a new deal led by Credit Suisse First Boston suggest that institutional buyers are back in the market for leveraged syndicated loans.

"As institutional investors continue to get more informed after the holidays, they will recognize that the performance of loans represents a good value," said Michael D. Rushmore, a loan analyst with BankAmerica Corp. in Chicago. "We're going to see them gather assets."

Renewed interest in corporate loans by institutional buyers-mutual funds, insurance companies, and private funds-is significant because the number of them has grown rapidly this year. Bankers estimate there are nearly 90 institutional buyers in the market, compared with a dozen three years ago.

Their return was first signaled this month by the response to an offering by Credit Suisse. The loan, a $500 million package for King Pharmaceuticals Inc., was launched Dec. 2. Under the original terms, the loan included a $150 million institutional piece.

But as commitments for the loan rolled in, Credit Suisse found investors willing to put up more than $600 million for that part of the loan. Bankers at Credit Suisse then increased the institutional piece to $275 million, reducing the bank piece to $125 million from $250 million.

The response is among the strongest for a highly leveraged loan since late summer, when the global financial crisis drove money managers to safe havens: government securities and investment-grade loans priced up to the London interbank offered rate plus 150 basis points.

The eight-year institutional term loan is priced at Libor plus 375 basis points-more than twice the investment-grade price. King is using the cash to refinance existing debt and pay for its buyout of drug lines from Hoechst Marion Roussel. As part of the buyout, the financing had to be in place by Jan. 1.

Bruce W. Ling, head of syndicated finance for Credit Suisse in New York, said the response from institutional investors took the lender by surprise and helped close the deal by Dec. 22, well ahead of the yearend deadline.

"We had committed when it was a very disruptive market," Mr. Ling said. "The company was really thrilled."

Mr. Rushmore said he believes the loan market has shown "remarkable resilience" compared with the high-yield bond market, where spreads remain wider than midsummer levels. In fact, the King financing is one of four leveraged loans trading above face value on the secondary market, he said.

Meanwhile, the King deal's success is good news for Credit Suisse, and not only because highly leveraged loans traditionally carry big profits for the underwriter.

Credit Suisse has been a one-stop shop for King this year, leading a loan syndication for the Bristol, Tenn.-based company in February and an $80 million initial public offering in June.

Since the offering, at $14 a share, King's market capitalization has jumped 50% to $738 million, with its share price ballooning to $23 on Nasdaq.

"We like to think our financing had something to do with that," Mr. Ling said.

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