This Is When Junk Bonds Go Kaboom!
- This Is When Junk Bonds Go Kaboom!
by Tyler Durden, www.zerohedge.com
We have been warning for months that high-yield bonds have decoupled from equity markets, just as they did in 2007/8, and the credit cycle’s turning will inevitably flow through to crush the only thing left supporting stock valuations – the irrational non-economic corporate buyback-er. However, as we detail below, time’s running out and it’s getting tougher out there for our QE and ZIRP-coddled corporate junk-bond heroes.
As WolfStreet.com’s Wolf Richter details, the toxic miasma of “distressed debt” is ready to go kaboom…
It’s getting tougher out there for our QE and ZIRP-coddled corporate junk-bond heroes.
Unisys, whose revenues and profits decline year after year and whose stock dropped from over $400 a share during the prior tech bubble to $13 a share now, withdrew its offer to sell $350 million of bonds on Friday.
The “current terms and conditions available in the market were not attractive for the company to move forward,” it said. According to S&P Capital IQ’s LCD, the five-year senior secured notes due in 2020, rated BB/Ba2, had been guided at around 8%. But buyers were leery, and they demanded more yield. They wanted to be rewarded just a little more for the substantial risk they were taking. So the notes failed to price, and Unisys withdrew the offering.