Not Halfway There, But Could It Be A Start?
January 8, 2009
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.
Sorry.
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