Tuesday, January 26, 2021

Tag: No Junk Debt Is Too Risky: Thank You Fed

No Junk Debt Is Too Risky: Thank You Fed

by Mish Shedlock, The Maven:

The Fed hasn’t even started buying corporate bonds. Yet the mere perception of Fed backing helps risky firms borrow anew. Please consider How Fed’s Bailout Changed Everything.

This was no secret on Wall Street. Surgery Partners’s majority owner, the buyout firm Bain Capital, had loaded so much debt onto the company’s books that when it went to the market last year to refinance maturing bonds, investors demanded a 10% interest rate to compensate them for the risk. The debt was rated CCC — eight levels below investment grade.