If banks don't want it why should you?
Quote of note:
The biggest boom is in loans to highly indebted companies. These deals, known as leveraged loans, rose some 60 percent over the last year, to $480 billion.
"There's been a party going on for the last year," said Mark Gold, who manages $4 billion in loan portfolios in New York for Trust Company of the West. The market has been so robust, he said, that there will eventually "be some blowups, probably within the next year or two."
Investors Flock to Loans Made to Companies Deep in Debt
By RIVA D. ATLAS
Charter Communications, the cable company controlled by Microsoft's co-founder Paul G. Allen, is struggling to hang on to subscribers even as it is weighed down by a hefty $19 billion in debt. Charter continues to lose tens of millions of dollars, and its stock trades at a mere $2 a share.
But the company has regained the confidence of once-skeptical lenders. Indeed, lenders are so confident, they have bid Charter's $6.5 billion in loans at 100.25 percent of face value, even though there is no chance lenders will get more than 100 cents back. That is up from a price of just 83 cents on the dollar less than three years ago.
The sudden popularity of Charter's debt is an example of a new exuberance in the market for corporate loans, an obscure investment once dominated by large commercial banks.
Over the last decade, banks have ceded much of the business of lending to riskier companies - those rated BB or lower- to an expanding group of investors including insurance companies, pension funds and individuals looking for higher- yielding alternatives to money market funds.
Lending to a broad range of companies is on the rise, with $1.3 trillion in financings completed last year, according to the Loan Pricing Corporation, a research firm. That is a 40 percent increase from the previous year.
