Credit Trends: Born This Way: Acceptance Grows For New Speculative-Grade Companies Through 30 Years Of LBOs, Bank Loans, And Falling Interest Rates - S&P Credit Research

Credit Trends: Born This Way: Acceptance Grows For New Speculative-Grade Companies Through 30 Years Of LBOs, Bank Loans, And Falling Interest Rates

Credit Trends: Born This Way: Acceptance Grows For New Speculative-Grade Companies Through 30 Years Of LBOs, Bank Loans, And Falling Interest Rates - S&P Credit Research
Credit Trends: Born This Way: Acceptance Grows For New Speculative-Grade Companies Through 30 Years Of LBOs, Bank Loans, And Falling Interest Rates
Published Jan 12, 2012
19 pages (6080 words) — Published Jan 12, 2012
Price US$ 850.00  |  Buy this Report Now

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Abstract:

As high-yield debt has gained acceptance, LBOs have become more prominent since the early 1980s. Bryan Burrough and John Helyar, in their book "Barbarians At the Gate," immortalized this kind of debt-fueled, private takeover of a public company. The book recounts the $31 billion takeover battle for RJR Nabisco that closed in 1989. As the "leveraged" in LBO implies, these deals include high levels of debt and credit risk that seldom fit an investment-grade credit profile. Since the 1980s, LBOs have gone through cycles of popularity, with buyouts growing in size and scope each cycle. The Nabisco takeover remained the largest LBO for nearly two decades until the resurgence of large takeovers in 2006-2007 when LBOs such as HCA Inc.

  
Brief Excerpt:

...1. Since 1981, the number of U.S.-based '###' rated nonfinancial companies has dropped from 61 to four, while the number of speculative-grade companies (those rated '##+' and lower) has risen to more than half 2,902 U.S.-rated companies. Currently, 64%, or 1,421, of nonfinancial ratings in the U.S. are classified as speculative grade. 2. This explosion of lower-rated debt has helped fuel growth in many industries. At the same time, some blame the vast leverage that resulted from the growth in speculative-grade debt as one of the key factors in the credit crisis that erupted in 2008, and from which the world economy is still suffering. 3. Several factors contributed to the diminished creditworthiness of U.S. companies over the past three decades, but two stand out: a search for yield on the part of investors as interest rates declined, and increasing comfort on the part of company management in taking on debt to increase shareholder value through dividends, acquisitions, and leveraged buyouts...

  
Report Type:

Commentary

Sector
Global Issuers, Public Finance, Structured Finance
Format:
PDF Adobe Acrobat
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S&P Credit Research—S&P Credit Research provides analysis on issuers and debt obligations of corporations, states and municipalities, financial institutions, insurance companies and sovereign governments. S&P also offers insight into the credit risk of structured finance deals, providing an independent view of credit risk associated with a growing array of debt-securitized instruments.

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Cite this Report

  
MLA:
S&P Credit Research. "Credit Trends: Born This Way: Acceptance Grows For New Speculative-Grade Companies Through 30 Years Of LBOs, Bank Loans, And Falling Interest Rates" Jan 12, 2012. Alacra Store. May 22, 2015. <http://www.alacrastore.com/s-and-p-credit-research/Credit-Trends-Born-This-Way-Acceptance-Grows-For-New-Speculative-Grade-Companies-Through-30-Years-Of-LBOs-Bank-Loans-And-Falling-Interest-Rates-1386633>
  
APA:
S&P Credit Research. (). Credit Trends: Born This Way: Acceptance Grows For New Speculative-Grade Companies Through 30 Years Of LBOs, Bank Loans, And Falling Interest Rates Jan 12, 2012. New York, NY: Alacra Store. Retrieved May 22, 2015 from <http://www.alacrastore.com/s-and-p-credit-research/Credit-Trends-Born-This-Way-Acceptance-Grows-For-New-Speculative-Grade-Companies-Through-30-Years-Of-LBOs-Bank-Loans-And-Falling-Interest-Rates-1386633>
  
US$ 850.00
$  £  
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