(snip)"Aug. 21 (Bloomberg) -- Leveraged-loan prices dropped for the first time in six weeks amid growing investor concern that a rally is faltering as corporate-debt defaults climb to a record.

The Standard & Poor’s/LSTA 100 Leveraged Loan index, which rallied 34 percent this year, fell 0.74 points since Aug. 14 to 83.10 points, the lowest level in a month. Reader’s Digest Association Inc., a member of the index tracking the most actively traded loans, received approval yesterday from bank lenders to restructure under a so-called prepackaged bankruptcy.

Buoyed by President Barack Obama’s stimulus plan and Federal Reserve actions to spur lending, investors entered the speculative-grade loan market betting that default rates would be lower than the 40 percent credit prices implied, said Mark Pibl, managing director of leveraged loans and high-yield debt at NewOak Capital LLC. They’re pulling out to secure profits, driving down prices as loan-market volatility reached a record in July and default rates soar toward 12.7 percent.

“They had a one-year performance in a three-month window,” Pibl said in a telephone interview from his office in New York. “What I would do is take all my gains, close out my book and go fishing for the rest of the year, and not risk it.” (snip)

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