Severe Indigestion
Brokers are struggling to unload debt from this years record $438 billion in LBO leveraged buyouts. 32% of the debt backlog has been cleared since July.
Citigroup, Goldman Sachs, Morgan Stanley and JPMorgan Chase are offering discounts of as much as 10%...
to clear the remaining $231 billion backlog of high yield bonds and loans.
As the ABCP asset backed commercial paper market collapsed, LBO issuance declined to $101.9 billion in the 2nd half from $336.4 billion in the first six months.
The Nattering One muses... we have nattered many a time on this one.
Leveraged LBO is another disaster just waiting to rear its ugly head. Adding un saleable MBS inflated this elephant to $1 Trillion.
The python (broker dealers) has choked and is now dying from severe indigestion.
As the debt "value" continues to erode for lack of buyers, most of the debt is being kept off book in SIV's.
As the companies that were bought out begin to underperform in this economic downturn,
and their stock price declines, and the value of the debt issued declines...
any buyout group that used borrowed funds should be put on watch for potential bankruptcy, as they will be unable to service the debt.
Citigroup, Goldman Sachs, Morgan Stanley and JPMorgan Chase are offering discounts of as much as 10%...
to clear the remaining $231 billion backlog of high yield bonds and loans.
As the ABCP asset backed commercial paper market collapsed, LBO issuance declined to $101.9 billion in the 2nd half from $336.4 billion in the first six months.
The Nattering One muses... we have nattered many a time on this one.
Leveraged LBO is another disaster just waiting to rear its ugly head. Adding un saleable MBS inflated this elephant to $1 Trillion.
The python (broker dealers) has choked and is now dying from severe indigestion.
As the debt "value" continues to erode for lack of buyers, most of the debt is being kept off book in SIV's.
As the companies that were bought out begin to underperform in this economic downturn,
and their stock price declines, and the value of the debt issued declines...
any buyout group that used borrowed funds should be put on watch for potential bankruptcy, as they will be unable to service the debt.
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