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First Data looks increasingly well-named. The credit card processing group’s $26bn buy-out will offer a first insight into the future of about $330bn of leveraged financing the banks committed to during the boom.

KKR, the group behind the deal, has thrown a bone to the banks by agreeing to some extra covenants on the debt. That gives investors a vestige of control if First Data hits trouble and should let the underwriting banks get a marginally richer price.

But KKR is digging in on the key issue of extremely favourable interest rates agreed with banks before the credit turmoil. So banks will still have to take a serious hit selling the debt on to asset managers and vulture funds – who will want their pound of flesh.

That said, the banks have one weapon at their disposal. If they are pushed too hard on price, they can simply not sell. Commercial banks can hold debt to maturity. Investment banks, meanwhile, have to mark it to market, and take a paper loss, although they do not actually have to sell.

It is too risky for most banks to hold all their potential buy-out exposure on their balance sheets. But they could hang on to most of First Data’s loans to avoid setting fire-sale prices for future deals. That might also cushion the hit when the banks come to sell the unsecured bonds, whose value will be even more impaired than the loans they are selling first.

First Data is the test. Expect a serious face-off between the banks and potential investors on valuation. After all, it is not just a readjustment in the credit markets they have to consider. The risks of an economic downturn are also growing. A recession really would affect the value of some of the more aggressive debt structures on offer.

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