If a company has too much debt and too little income, it's going to struggle to pay its bills, regardless of when its bonds come due.
This is a lesson that investors are learning as distressed U.S. bonds suffer their worst performance since 2008. The notes have plunged 7.5 percent so far this year and 3.2 percent this month alone, with some of the biggest losers being the debt of Lightstream Resources Ltd., Peabody Energy Corp., and Cliffs Natural Resources Inc., according to Bank of America Merill Lynch index data.
It's a painful wake-up call for investors who've gotten used to high-yield debt being synonymous with big returns in an era of unprecedented Federal Reserve stimulus. Even as companies have pushed back debt maturities and lowered interest expenses, that doesn't mean they can continue to work magic in the face of a slowing world economy and oil prices that have fallen 51 percent since the 2014 peak.
Complete your profile to continue reading and get FREE access to Treasury & Risk, part of your ALM digital membership.
Your access to unlimited Treasury & Risk content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Critical Treasury & Risk information including in-depth analysis of treasury and finance best practices, case studies with corporate innovators, informative newsletters, educational webcasts and videos, and resources from industry leaders.
- Exclusive discounts on ALM and Treasury & Risk events.
- Access to other award-winning ALM websites including PropertyCasualty360.com and Law.com.
*May exclude premium content
Already have an account? Sign In
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
