The Wall Street Journal reported that the wave of cash raised by special-purpose acquisition companies (SPACs) is fueling activity in the junk debt market at levels not seen since the dot.com-boom from two decades ago. So far this year, SPACs have issued roughly $100 billion of stock to purchase private companies and take them public, with some of that money going toward companies with below investment-grade credit ratings, significantly boosting their gains on paper. [WSJ; April 23, 2021]
Bloomberg reported that bonds issued by Hertz Global Holdings, Inc. have made a drastic turn-around since the Covid-19 pandemic tanked the value of securities due in 2022 and 2028 to an average of less than 10 cents on the dollar on May 4, 2020. Those bonds are now trading at over a dollar, an increase of roughly 1,000 percent. The likely cause for the dramatic turn-around? Predictions of a post-Covid-19 travel and vacation boom, which has spurred a bidding war among investors seeking to capitalize on Hertz’s situation. [Bloomberg; April 22, 2021]
Although cheap credit has masked distress in the markets, Bloomberg reported that BlackRock says it’s nevertheless still out there – if you know where to look. BlackRock, an NYC-based multinational investment management corporation, predicts that, despite the availability of cheap financing, bankruptcy filings will increase in sectors hit hard by the pandemic, like retail and energy. Data compiled by Bloomberg show bankruptcy filings have slowed in recent weeks, with only one new filing from a company with at least $50 million in liabilities. [Bloomberg; April 20, 2021]