Wall Street is looking to jumpstart junk-debt deals after the FED’s new plan

The US Federal Reserve announced its plan to buy debt issued by companies recently downgraded to junk directly, alongside with some bond ETFs and top-rated tranches of collateralized loan obligations.

Bankers who arrange debt sales for businesses with less than stellar credit ratings are getting ready to ramp up new offerings after the Federal Reserve threw announced its new plan for the market for risky borrowers. The Fed’s policy to directly buy debt issued by companies recently downgraded to junk, alongside some bond ETFs and top-rated tranches of collateralized loan obligations, has provided a much-needed boost to Wall Street and has triggered a flurry of phone calls to drum up business.

 

Junk-debt offerings to start after the long weekend is over.

According to news reports, junk-debt offerings might start as soon as the long weekend is over. Bankers are in talks with large companies that had been waiting for the market to improve before launching any new deals. Bankers are also talking to private equity firms about options for their portfolio companies. The likelihood of raising debt would offer an alternative to bank financing or cash from equity investors to get them through business shutdowns due to the ongoing COVID 19 pandemic. 

 

A dozen companies have sold junk bonds in the last couple of weeks.

According to the Bloomberg report, around a dozen companies have sold junk bonds or leveraged loans in the past couple of weeks as markets started to thaw. But the companies often had to pay interest rates in double digits to sell those junk bonds. The Fed’s action for some issuers could mean that they will simply have to pay less to borrow.

The United States has become the epicenter of the Coronavirus with the highest number of positive cases and deaths in the entire world. As on Saturday, the total number of COVID 19 positive cases in the country reached above 500,000, with over 18,700 deaths reported so far. The numbers are still increasing exponentially all over the world. Earlier, the World Trade Organisation said that they are expecting a fall of up to 32% in the global trade for the year 2020. 

ADVERTISEMENT

Leave a reply

Please enter your comment!
Please enter your name here