The High Yield Market Has Officially Topped, With Bondholders Eager To Cash Out Existing Equityholders In The Crappiest Of Names

Tyler Durden's picture

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yy's picture

Nice post TD, essentially the point is that regardless of where interest rates are  (obviously 2009 and 2007 have nothing in common) the ability to force savers to choose self-destructive paths is unchanged.

It is fascinating indeed, I beg for an explanation- other than the people who have actual vested interests must be not involved in these transactions, just absentee owners... But who are they?!

Anonymous's picture

I'm looking for the member greensharts.

Green Sharts's picture


If somebody had told me at the beginning of this year that junk spreads to treasuries would be below where they were pre-Lehman and private equity would be doing dividend recap bond issues I would have never believed it.  People have short memories.  There is so much cash flowing into junk bonds that the fund managers will apparently buy any new issue.  As they say on Wall Street, when the ducks quack, feed them.

rico sauve's picture

Hmmm... sounds familiar. What happens when we run out of food, GreenSharts?

Anonymous's picture

...they are pensions, endowments, and other so called sophisticated investors that don't have a clue what they own or what their hedge fund and PE allocations are doing.

All they see is +45% YTD numbers via their HFs (which is coincidentally the return on any HY index) and wait-and-see-take-us-to-the-promised land IRRs for PE. Remember, dividend recaps serve to add an early cash flow to the IRR equation for PEs and their LPs. LPs don't understand either finance or math enough to know that as Houdini Howard Marks once quiped, 'you can't eat IRR'.

Anonymous's picture

Sounds like somebody is upset that they missed some fantastic gains in the HY arena this year....

jm's picture

Missing out on HY in this melt-up is my single greatest regret.

I do wonder if seeds are being sown for some industrial grade HY revulsion.

It's all about the yield in the end.   

GoldSilverDoc's picture

Could somebody PULEEZE send me to the right place - I only need around $100MM or so, and I have identified some absolutely EXCELLENT land, prudently and judiciously selected in Argentina, Paraguay, northern Mexico, and other locations, which needs to be bought, then cleared, then planted with soybeans.  And grapes.  I will be glad to send along my telephone number if I am going to get a call from the Squid telling me when we can close this deal.

Chopshop's picture

best of luck, GoldSilverDoc ... but i think that window has long-since closed.

if you can find someone willing to float you that loan then hat's way the f' off. current climate even with fungible collateral is still very cold to such alternate funding / emerging companies / vc. plus you're biz is very correlated so, sorry, but doubt it'll fly. wish you the very best, fwiw.


great piece, TD. thanks for it.

spekulatn's picture

Could somebody PULEEZE send me to the right place - I only need around $100MM or so,


 Washington,D.C. homey.

Just tell those d-bags its for climate change. 

Mission Accomplished.

Your welcome.

Cursive's picture

Dividend recapture is nothing but the used condom from a Private Equity prison rape of a good company.  Let's tally the losers here.  First, the employees of a once solid company get screwed because the PE boys couldn't sell a butane lighter to a meth head.  Second, some high-yield seeking clown gets screwed buying into this now worthless company.  Please tell me that the FR is not buying this paper.  Please.

darkpool2's picture

That's why we shouldn't do the audit. Wouldn't want to spoil anyones nice supper.

Anonymous's picture

Clear Channel? They're still in business?

Anonymous's picture

It's no excuse, but by way of an explanation, the massive inflows to bond-oriented mutual funds is worth examining here. There is simply a lot of demand for new paper. Yield hunger is extreme. But TD is correvt: it will end in tears.

And he forgot to mention the new CLOs floated last week.....


Anonymous's picture

Does anyone know who the buyers of these are? Are these second tier bond fund managers?