Brian Chappatta, Columnist

Junk Bonds Won’t Save Everybody From Going Bust

The high-yield debt markets are starting to look frothy as companies front-run election volatility.

October 21, 2020 at 10:30 AM UTC

Brian Chappatta is managing editor of Bloomberg News' leveraged finance and distressed debt teams. He was previously managing editor and team leader of its wealth group. Before that he was a Bloomberg Opinion markets and finance columnist and a bonds reporter for Bloomberg News.

Pandemically challenged.
Photographer: Timothy Fadek/Bloomberg

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In April, with the coronavirus pandemic in full swing in the U.S., Texas billionaire Tilman Fertitta had little choice but to turn to the then-frozen leveraged-loan market. He offered a staggering 16% yield to entice investors to extend a lifeline to his empire of Golden Nugget casinos and restaurants such as Bubba Gump Shrimp Co. and Rainforest Cafe. The $300 million loan ultimately priced to yield 14%, a level I called “painful but necessary.”

Fast-forward six months to last Friday. That loan rallied more than any other member of the S&P/LSTA Leveraged Loan Index, according to data compiled by Bloomberg, reaching about 113 cents on the dollar for a yield of 5.8%.