myinvestorsplace
Junior member
- Messages
- 18
- Likes
- 1
Distressed Debt Waterfall?
Dana Perino from the Bush admistration tried to calm fears yesterday with her soothing statements.. but the facts are alot different..It should come as no surprise that there's more distressed debt trading right now than at any other time in history - approx $184 billion worth, and you know what..probably a heck of alot more that is lurking around...With all the cheap money that flowed all over the globe is it surprising.. VC firms buying companys thinking they will pay top dollar and sell it to the next guy.. or how about real estate developers selling houses to speculators that going to sell to someone else...
It has been simply insane!!!
Historically, these large levels of distressed debt have preceded record numbers of bankruptcy filings. Default ratios have peaked in the past...usually 12-24 months after the distressed-securities ratios reach their heights. Thus... both the level of junk debt and the classification of distressed securities can be viewed as leading indicators and a clue to what we might expect in 2009 and possibly more so in the future.
The total of distressed has grown approximately 11.5% since the last bankruptcy boom. I read a report that the current level of distressed debt could suggest nearly $97 billion in defaults in 2009.
The problem is so pressing that one out of every three junk bonds is now trading at "distressed levels".
This is defined as an interest rate that's 1,000 basis points or more above comparable Treasury securities.
I will give you a scary fact...potentially 33% of the junk bonds out on the market aren't worth the paper that they're printed on. Nouriel Roubini might be more correct when he upgraded his estimate of losses in this credit crisis to 2 trillion dollars.
I will leave you on a more positive note... This to will end... The world will not end...and More so there will be tremendous oppurtunities for prudent investors in the distressed debt field
Andrew Abraham
Dana Perino from the Bush admistration tried to calm fears yesterday with her soothing statements.. but the facts are alot different..It should come as no surprise that there's more distressed debt trading right now than at any other time in history - approx $184 billion worth, and you know what..probably a heck of alot more that is lurking around...With all the cheap money that flowed all over the globe is it surprising.. VC firms buying companys thinking they will pay top dollar and sell it to the next guy.. or how about real estate developers selling houses to speculators that going to sell to someone else...
It has been simply insane!!!
Historically, these large levels of distressed debt have preceded record numbers of bankruptcy filings. Default ratios have peaked in the past...usually 12-24 months after the distressed-securities ratios reach their heights. Thus... both the level of junk debt and the classification of distressed securities can be viewed as leading indicators and a clue to what we might expect in 2009 and possibly more so in the future.
The total of distressed has grown approximately 11.5% since the last bankruptcy boom. I read a report that the current level of distressed debt could suggest nearly $97 billion in defaults in 2009.
The problem is so pressing that one out of every three junk bonds is now trading at "distressed levels".
This is defined as an interest rate that's 1,000 basis points or more above comparable Treasury securities.
I will give you a scary fact...potentially 33% of the junk bonds out on the market aren't worth the paper that they're printed on. Nouriel Roubini might be more correct when he upgraded his estimate of losses in this credit crisis to 2 trillion dollars.
I will leave you on a more positive note... This to will end... The world will not end...and More so there will be tremendous oppurtunities for prudent investors in the distressed debt field
Andrew Abraham
Last edited by a moderator:
