A cruel rally in junk bonds

June 4, 2009 | By Jim Kim

Bloomberg notes that a strong rally in high-yield bonds has cursed many ailing companies that were hoping to buy back debt or exchange them for other bonds. To cut their debt burdens, lots of companies were taking advantage of severely discounted prices. Now that opportunity seems to be slipping away.

Bloomberg quotes no less that Steve Schwarzman, chief of Blackstone Group: Its portfolio companies, like Freescale, "were able to buy some stuff at really good prices...I wish we had bought back more, because those markets have really strengthened." We're still seeing a lot of exchange offers, but at the CCC level, it's getting much harder. We may end up seeing more bankruptcies. How ironic? This has also affected the market for leveraged loans.

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