KKR’s Chilling Message about the “End of the Credit Cycle”

[marmar]

KKR’s Chilling Message about the “End of the Credit Cycle”
by Wolf Richter • April 6, 2016


[font color="blue"]“Opportunities in Distressed Assets” as current investors get crushed[/font]

After seven years of “emergency” monetary policies that allowed companies to borrow cheaply even if they didn’t have the cash flow to service their debts, other than by borrowing even more, has created the beginnings of a tsunami of defaults.

The number of corporate defaults in the fourth quarter 2015 was the fifth highest on record. Three of the other four quarters were in 2009, during the Financial Crisis.

At stake? $8.2 trillion in corporate bonds outstanding, up 77% from ten years ago! On top of nearly $2 trillion in commercial and industrial loans outstanding, up over 100% from ten years ago. Debt everywhere!

Of these bonds, about $1.8 trillion are junk-rated, according to JP Morgan data. Standard & Poor’s warned that the average credit rating of US corporate borrowers, at “BB,” and thus in junk territory, hit a record low, even “below the average we recorded in the aftermath of the 2008-2009 credit crisis.”

The risks? A company with a credit rating of B- has a 1-in-10 chance of defaulting within 12 months! ...................(more)

http://wolfstreet.com/2016/04/06/opportunities-distressed-assets-for-private-equity-kkr-existing-investors-crushed/

[dixiegrrrrl]

1. Once again, Marmar, you come thru with important money news.

Student debt defaults rising rapidly
car loan debt defaults rising rapidly
Both have been 'securitized" and sold as bonds, garbage bonds mixed in with less garbage bonds, just like the sub-prime housing mortgages were.
Nothing has changed.

[JustAnotherGen]

2. Fellow Traveler - Fellow Watcher

Thank you for this.

I tend to get 'emotional' about this topic.

You give just the facts.

The risks? A company with a credit rating of B- has a 1-in-10 chance of defaulting within 12 months!


In total, $4.1 trillion in bonds will mature over the next five years. If companies cannot get new funds at affordable rates, they might not be able to redeem their bonds. Even before then, some will run out of cash to make interest payments.

If they run out of cash to make interest payments - They also default.

The 1-in-10 is frightening.

[mopinko]

3. my financial advisor says the same.

i had to hire a tax attorney, as i have a bit of a situation. he is also a cfp. he thinks real estate has a growing bubble, and the stock market, too.
for what that is worth. but he is here in chicago, where a good chunk of the financial sector is located.

[WhiteTara]

4. That's a lot of debt and it's going to come

raining down on us like fire.

[zentrum]

5. Most of it is

….a type of ponzi scheme. There's more debt chasing itself around the world than wealth. Thom Hartmann several years ago said, I believe, that the debt is 666Trillion—but there's only 60Trillion in wealth—worldwide.

The current weird capitalism we have is all based really on the debt of giant financial corporations—it's not real classical capitalism.