“Distress” in US Corporate Debt Spikes to 2009 Level
Distress in US Corporate Debt Spikes to 2009 Level
by Wolf Richter December 2, 2015
Investors, lured into the $1.8-trillion US junk-bond minefield by the Feds siren call to be fleeced by Wall Street and Corporate America, are now getting bloodied as these bonds are plunging.
Standard & Poors distress ratio for bonds, which started rising a year ago, reached 20.1% by the end of November, up from 19.1% in October. It was its worst level since September 2009.
It engulfed 228 companies at the end of November, with $180 billion of distressed debt, up from 225 companies in October with $166 billion of distressed debt, S&P Capital IQ reported.
Bonds are distressed when prices have dropped so low that yields are 1,000 basis points (10 percentage points) above Treasury yields. The distress ratio is the number of non-defaulted distressed junk-bond issues divided by the total number of junk-bond issues. Once bonds take the next step and default, theyre pulled out of the distress ratio and added to the default rate.
During the Financial Crisis, the distress ratio fluctuated between 14.6% and, as the report put it, a staggering 70%. So this can still get a
lot worse. ................(more)
http://wolfstreet.com/2015/12/02/distress-in-corporate-debt-spikes-to-september-2009-level/