Does Deutsche Bank’s Junk Bond Firesale Mean The Party Is Over?
by Tyler Durden
ZeroHedge.com
Thu, 06/07/2018
Less than a month ago, Moody’s warned that “the prolonged environment of low growth and low interest rates has been a catalyst for striking changes in nonfinancial corporate credit quality,” and adds that “the record number of highly leveraged companies has set the stage for a particularly large wave of defaults when the next period of broad economic stress eventually arrives.”
This was followed by an ominous warning from Bill Derrough, the former head of restructuring at Jefferies and the current co-head of recap and restructuring at Moelis:
“I do think we’re all feeling like where we were back in 2007,” he told Business Insider: “There was sort of a smell in the air; there were some crazy deals getting done. You just knew it was a matter of time.”
Which makes sense when one notes that since 2009, the level of global nonfinancial junk-rated companies has soared by 58% representing $3.7 trillion in outstanding debt, the highest ever, with 40%, or $2 trillion, rated B1 or lower. Putting this in contest, since 2009, US corporate debt has increased by 49%, hitting a record total of $8.8 trillion, much of that debt used to fund stock repurchases.
Meanwhile, as a percentage of GDP, corporate debt is at a level which on ever prior occasion, a financial crisis has followed.
The Rest…HERE
