Not Halfway There, But Could It Be A Start?

Gnarly readers, I beg your forgiveness in advance, but please do consider that I’ve been writing this blog for sometime now and have never once sunk to the depths of the Bon Jovi reference. But seeing as Jersey’s favorite hair band has entered the realm of debt repayment, even if it is political debt (I’ll get to this in a bit), I decided it was about time I acknowledge their work. 

As such, I give you this paragraph: While 2008 gave debt a bad name, loan and bond investors appear to be warming up to subinvestment grade—they want it, dead or alive. Still, the markets are nowhere near halfway there, still definitely living on a prayer.

Sorry, that really was uncalled for.

Let’s try again: The loan market’s LCDX index this week leapt back into the 80s (the price not the decade), after more than a month trading in the 70s. And high yield bond funds finished 2008 with five consecutive weeks of inflows, amounting to $1.7 billion, and came out ahead in seven of the last nine weeks of last year.

But before I allow these tidbits to carry me away on a puffy green cloud of optimism, I should note that there is plenty of lousy economic news to keep hope in check. And the big concern for the leveraged finance markets, a rash of expected defaults, still looms.

Which brings me back to Bon Jovi. The 46-year-old musician plans to perform a fundraiser next week to help pay down the remaining $6.3 million Hillary Clinton paid out-of-pocket to support her 2008 presidential bid. In all, the former New York senator took on $13.1 million in personal loans. Tickets for the Jan. 15 event—dubbed “a final evening in support of Hillary Clinton for President Debt Relief”—range from $75 to $1,000.

Now clearly, Clinton’s $6.3 million amounts to peanuts compared with the debt of many high yield issuers. But maybe to some extent, fundraising isn’t such a bad idea. A middle-market company with a relatively small loan or an issuer with a coupon payment coming due might make a reasonable candidate. I suggest they use the threat of layoffs to convince well-meaning rockers their free performance is altruistic. U2 loves this stuff. Between them and Springsteen, half the subinvestment grade debt coming due this year could be wiped out in one big Debt-apalooza ’09 tour.

Sound farfetched? Maybe so. Maybe more traditional measures are all these companies can manage. Just hope that they don’t end up … a devil on the run, a six-gun lover, a candle in the wind … going down in a blaze of glory.


Recent Posts

Investors Win Warner Chilcott Battle, But Expect a War

Investors this week pushed back on Warner Chilcott’s attempt to reduce pricing on its $1.95 billion term loan B, but most don’t believe the market’s repricing fight is over...

Bad Buyouts and What We Could Do about Them

Allied Stores. Burlington Industries. Charter Medical. E-H Holdings. Federated Department Stores… These companies are among the 13 that, between 1985 and 1989, issued a billion or more in junk bonds to help fund a buyout—then promptly went bankrupt...

A Repeat of 2009 Returns? Not. But No Disasters Either

As we here at Leveraged Finance News join you in saying goodbye to 2009 and looking ahead at the year to come, two little words spring to mind: do over? Maybe not all of it, but certainly returns...

Cha-Ching! High Yield Brings High Bonuses

While returns in the 40% to 50% range portend a 2009 Grinch-free holiday season for most leveraged loan and high yield bond professionals, those dedicated to selling and trading junk bonds are on track to receive the highest bonuses...

Index of Posts