Leveraged Debt, Part of the Credit Bubble, Attracts Yield-Hunting Investors; Not as Frothy as '07One of the markets at the heart of the credit bubble has surged back with surprising speed as investors chasing yield are increasingly willing to finance riskier companies.
Poster children of the mid-2000s credit bubble, leveraged loans are set to have their busiest year since 2008, thanks to a rush of money into the market from investors looking for high-yielding alternatives to stocks and junk bonds. It is a boon for speculative-grade companies looking to refinance and for private-equity firms hoping to start a buyout wave.
But just as the market has sprung back from its depths, so too has the relative riskiness of many loans. Investors are letting companies take on more debt relative to their cash flows and use the proceeds for creditor-unfriendly activities like paying dividends to stockholders.
Though the market is nowhere near as frothy as in 2007, some of these loans could suggest investors will make riskier bets to attain higher-yielding assets, despite the economy's wobbles.
Friday, September 17, 2010
Who Do You Think Is On The Wrong Side of THIS Trade ?
from the wsj