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Distressed Debt Balloons to Almost $1 Trillion, Nears 2008 Peak
Oil & gas sector leads with $161 billion of distressed debt. Investment-grade issuers such as Ford trade at deep discount.
The amount of distressed debt in the U.S. has quadrupled in less than a week to nearly $1 trillion, reaching levels not seen since 2008 as the collapse of oil prices and fallout from the coronavirus shutters entire industries across the globe.
In total, the tally has ballooned to $934 billion of U.S. corporate bonds that yield at least 10 percentage points above Treasuries and loans that trade for less than 80 cents on the dollar, according to data compiled by Bloomberg. That’s nearly double the amount from less than a week ago. The total is probably even higher, because the calculation excludes debt of small-to-medium sized companies whose loans trade rarely, if at all.
The chinavirus pandemic has caused the worst sell-off since the global financial crisis and deepened stress in credit markets. Driven by some of the lowest oil prices since the early 2000s, the amount of distressed bonds has surged to the highest level since April 2009. Distressed debt describes the borrowings of companies that are perceived to be under significant financial pressure, and often suggests there’s considerable risk that the debtholders won’t get paid everything they’re owed.
As a global recession looms and businesses remain under forced closures, more issuers are likely to end up in similarly dire situations. The Trump administration struck a deal overnight on a rescue package worth about $2 trillion in spending and tax breaks to bolster the U.S. economy and fund a nationwide effort to stem the chinavirus. The amount of distressed debt tied to the oil and gas sector stands at over $161 billion, up from $128 billion a week ago. One of the biggest casualties has been Occidental Petroleum Corp., which has seen its funding costs skyrocket and its credit rating cut to make it the biggest fallen angel in the current downgrade cycle. Oxy’s bonds led the list of high-yield losers on Wednesday, with four of its issues among the top 10 decliners.
Energy isn’t alone. Every sector except utilities is under stress, with distressed ratios growing by double or triple digits. Telecommunications, retail, entertainment and healthcare industries make up the bulk of distressed debt. Retailers such as Neiman Marcus Group Inc. and theater chains such as AMC Entertainment Holdings Inc. have been hit hard as companies are forced to close and customers are told to stay home.
Distress in the automotive industry also jumped as consumers decide to cancel travel and stay put. Even investment-grade giants are at risk. Ford Motor Co. now makes up one of the largest issuers with debt tumbling to distressed levels, with a dozen issues hovering near or below 75 cents on the dollar.
https://www.bloomberg.com//news/articles/2020-03-25/distressed-debt-balloons-to-almost-1-trillion-nears-2008-peak
most of that stuff is not on, as the anon has said. I see tons of jets in and out of the danger zone all the time but none are switched on. we only know what they want us to know.
the DS controls all of them and they were told to.
Sucks when you run out of money and have to play Mafia boss…and you will comply or lest you have a terrible unforeseen accident.
this is already issued debt that they are all carrying and eating shit on. The FRBNY programs are a different animal. I hear you though. It's all the same in the end.