24/7 Wall St. » IQW

A Junk Bond Depression?

247wallst — Wed, 06 Feb 2008 05:58:39 +0000

The default rate on junk bonds in 2007 was well under 1%. Junk guru and finance professor Edward Altman says that number will move well above 4.6% this year. According to The Wall Street Journal "already in January, Mr. Altman estimated defaults hit $3.2 billion, about 60% of the total for all of 2007." That means the level of defaults could move well above 5%, if things stay bad.

Junk bonds, or "high-yield" as Mr. Mike Milken liked to call them, touch a much broader spectrum of the economy than most investors would guess. Not only are high-yield bond funds popular with investors, institutions also own baskets of this debt. It is not terribly unlke baskets of mortgages, credit card, or auto loans.

Companies financed by junk bonds employ a lot of people. Quebecor (NYSE: IQW) which recently defaulted on some of its bonds, employees several thousand people. Sirva (NYSE:SIR) has 4,600 workers. It has had trouble making debt payments. Junk debt helped finance big newspaper chains including McClatchy (NYSE: MNI) and Journal Register (NYSE: JRC)

To make the point, companies financed by junk bonds employ hundreds of thousand of people and have suppliers who employ hundreds of thousand more.

A rising junk bond default rate is an early indication that empoyment numbers may begin to head in a bad direction.

Douglas A. McIntyre

The 52-Week Low Club

247wallst — Fri, 16 Nov 2007 16:19:32 +0000

Quebecor (IQW) Printing company announces refinancing and get downgrades. Falls to $3.03 from $14.79 high.

Virgin Mobile Usa (VM) Wider loss that expected. Falls to $8.07 from 52-week high of $15.69.

Standard Pacific (SPF) Home builder. Nothing more to say. Drops to $3.05 from 52-week high of $30.52.

Fannie Mae (FNM) Mortages and investigations. Bad mix. Falls to $36.86 from 52-week high of $70.57.

Atherogenics (AGIX) Problem with diabetes drug. Down to $.62 from 52-week high of $13.34.

Yrc Worldwide (YRCW) Weak trucking trends. Down to $17.39 from 52-week high of $47.09.

Douglas A. McIntyre

The 52-Week Low Club

247wallst — Tue, 13 Nov 2007 16:00:39 +0000

Aca Capital (ACA) S&P cuts rating after big loss. Drops to $1.60 from 52-week high of $16.55.

Quebecor World (IQW) Refinances company, brings on new debt. Falls to $4.12 from 52-week high of $14.79.

Assisted Living Concepts (ALC) What a drag its is getting old. Poor earnings. Down to $6.95 from 52-week high of $13.18.

SPACEHAB Incorporated (SPAB) Big Q1 loss. Falls to $.11 from 52-week high of $1.23.

Inphonic Inc (INPC) A little delisting problem with Nasdaq. Down to $.03 from 52-week high of $14.49.

FOCUS Enhancements (FCSE) Weak Q3 results. Drops to $.61 from 52-week high of $1.83.

Douglas A. McIntyre

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