High Finance

The average leveraged loan had a debt-to-Ebitda ratio of 6x at year-end 2021, and this calculation was often based on aggressive Ebitda adjustments, meaning true leverage was often greater.

“In the decade before 2022,” the Oaktree authors lead off, “many sponsor- backed companies financed leveraged buyouts by borrowing heavily in the broadly syndicated loan and private cred- it markets—and the majority of this debt had floating rates.” Naturally, the 500 basis-point jump in reference rates spells higher borrowing costs for the... See more

[Tidewater] sold $250MM of senior unsecured bonds maturing in 2028 with a 10 3/8% coupon at a price of 99. - they now trade at 102 to yield 9.8%, a spread of 522 basis points over Treasurys, or 124 basis points wider than the average single-B spread. - implies they are “deep junk”... See more

We write to speculate on the potential for a comeback. Grant’s, don’t mistake us, is bearish on bonds for the long run. If past is prologue, and if there’s anything at all to the fine art of pattern recognition, a new cycle of irregularly rising rates could be upon us, and it might persist for decades, like the 3.5 decade bear bond... See more

Assume, again, a one percentage- point drop in the bonds’ respective yields. In that case, the U.S. Treasury 1.875s of 2051 would rally by 24%, to 74.30 from 60.15, and the on-the-run 30-year Treasury, the 4.125s of 2053, by 19%, to 116.69 from 97.91.

In 2019, Ioannis Rallis, head of the group for European supranational, sovereign and agency debt-capital markets at J.P. Morgan, laid out the bullish case in these words: “With a high convexity bond, the price falls less if yields go up than it increases when yields go down. That asymmetry is very interesting for some investors, who can use it as a... See more