After declaring a huge loss for the first half of this year, Royal Bank of Scotland (RBS), UK's second-biggest bank, is looking to raise capital to finance its operations, and is reportedly selling $8 billion of leveraged loans to several private equity firms including Blackstone unit GSO Capital, TPG Capital and Apollo Alternative Assets. (See: RBS takes $1.35 billion H1 loss after $8.9 billion write-down)

According to the Financial Times which first reported this, the acquirers of the loans may make returns of as much as 30 per cent, given the markdown on the sale prices.

The paper quoted Blackstone president Tony James making this favourable assessment. Such deals often involve attractive financing terms - with banks lending 80 cents on the dollar in most cases.

Apollo and GSO have also bought $5 billion of debt from RBS, Credit Suisse and Deutsche Bank that together financed the recently re-worked buy-out of Clear Channel, the US radio station owner, by Bain Capital and Thomas H Lee.

More large sales of leveraged loans from last year - such as debt financing Cerberus Capital's purchase of Chrysler and Terra Firma's buy-out of EMI - are less likely because potential buyers want bigger discounts, market participants say.

Private-equity firms are seeking high returns from deeply discounted debt because turmoil in the credit markets has made it difficult for them to borrow enough money to do big buy-outs. Including the most recent transactions, Apollo, TPG and GSO have bought $25 billion-$30 billion in buy-out loans since April.

RBS's recently declared loss was very much in contrast to its fortunes a year before, when it had reported a £3.56 billion for the same period. At that time, the bank was riding high, leading a consortium takeover worth $100 billion for Dutch bank ABN Amro. (See: Royal Bank of Scotland- Fortis- Santander consortium acquires ABN Amro in world's biggest banking takeover)