This is ties in Doug the debt is way too high and the banks are the holders of debt. The SEC ws not doing its job and it is like putting apples on a street corner you are going to have some who take one and you are going to have those who pig out. We had a bunch of pigs in my opinion.
Debt is too vast and chances are pretty high that this SEC interest will vanish i hope not as it is the best thing President Bush could do for this country. It definitely isn't the easiest as the hand that feeds can get severed. Takes one strong warrior to clean up the muck that has been run through.
Past experience states that what happens is there is one less CPA firm seven I think are now three. UK bore the brunt of the last big effort and that was a UK company and one less CA CPA firm. They shrink but unless the wrong doing is addressed and changed it continues. Could very well be in twenty years is one super studded giant in the accounting field and no one left to question their actions. Would be a blessing for the plebs as Rose would say if the SEC follows through this time.
Reuters Business Report
Troubled Corporate Debt Hits $879 Billion
Friday October 4, 10:52 am ET
By Jonathan Stempel
NEW YORK (Reuters) - The total of corporate debt in default, or "distress," worldwide has grown to $879 billion, almost 45 percent of the entire high-yield debt market, and nearly one-third more than the gross domestic product of Canada, population 31 million.
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The total, up nearly $200 billion in 2002, puts in stark relief the losses that many high-yield investors have suffered in their portfolios amid anemic economic growth, credit rating cuts, corporate scandals and tighter credit markets.
Edward Altman, a professor at New York University's Stern School of Business and expert on troubled debt, set forth the $879 billion figure at a distressed debt conference this week.
"That is by far the record," he said. "Our distressed market is (effectively) the eighth largest country in the world." (Canada in 2001 had a GDP of $677 billion, eighth in the world behind Italy, according to the World Bank.)
As of Sept. 15, Altman said, 20 percent of high-yield debt was in default, the most since 1992, and another 25 percent was in distress. The surge has contributed to a nearly 9 percent year-to-date loss on a total return basis for high-yield, or junk, bonds, according to Merrill Lynch & Co.
High-yield debt is rated "Ba1" or lower by Moody's Investors Service and "BB-plus" or lower by Standard & Poor's Ratings Services because of their credit risks.
VULTURES
Debt is in default when an issuer, such as phone company WorldCom Inc. (Other OTC:WCOEQ.PK - News) or cable TV operator Adelphia Communications Corp. (Other OTC:ADELQ.PK - News), stops paying interest.
This market totals about $389 billion in face value and $119 billion in market value, Altman said at the Thursday conference, sponsored by the Fixed Income Analysts Society.
Altman and Merrill Lynch say debt in "distress" yields at least 10 percentage points more than similar maturity U.S. Treasuries, which Merrill Lynch said yielded an average 3.25 percent. The distressed debt market totals about $490 billion in face value and $279 billion in market value, Altman said.
The totals have swelled in part because investors are now quick to sell at a hint of trouble, sending prices down fast.
"Vulture" investors often buy the debt and push management to make changes that might increase their investments' value.
The surge in defaulted and distressed debt has given rise to a new, still small class of fund manager, one who invests in distressed debt hoping to take actual control of a company.
"We're usually buying accidents after they've already happened," said one, David Matlin, formerly of Credit Suisse First Boston and now chief executive of MatlinPatterson Asset Management. It buys debt at 30 cents on the dollar or less, and 92 percent of its assets are in U.S. companies, he said.
"SCARY"
From 1998 to August 2002, the Altman-NYU Salomon Center's defaulted bond index fell an average 10.98 percent a year. The bonds are worth 18 cents on the dollar, less than half their historical average of 42 cents, he said.
Investors in defaulted bank loans are faring poorly, too, belying the idea that because loans are often more senior, they are safe. Altman's bank loan index is down an average 1.13 percent a year since 1998.
The 12-month default rate, measured by market value, is now 15 percent, a record unlikely to fall fast soon, Altman added.
"Performance has been abysmal in this market," he said. "And yet, there's never been a time that more people are trying to raise money, and more money is moving in to this area."
Moody's and S&P's default rates are below 10 percent. They measure defaults by number of issuers, not in dollars.
Matlin said he likes debt of companies with "good assets in a bad space," especially ones in volatile industries, such as commodity cyclicals, able to rebound fast.
Not all bets work out. He bought a big stake in private chemical company Huntsman Corp., only to see its founding family restructure $775 million of debt and keep control.
Matlin said he won't use leverage -- borrowing money to juice potential returns -- for his strategy. For good reason.
"This is scary enough for us without leverage," he said. |
