Asset Class Weekly: High Yield Blood Bath

It was just one month ago that I wrote my latest update from the high yield battlefront. Conditions were already dire with oil prices still hovering just above $38 per barrel. Of course, the last month has seen overall market conditions go from bad to worse. Not only has oil fallen by another -25% to below $30 per barrel, but the high yield bond market itself has shed another -6%. This raises an worthwhile question: following this latest decline, are we now nearing a bottom in the high yield bond market, or is the worst still yet to come?
To find the answer to this question, we will return to the battlefield to assess the latest carnage. For if we are approaching a bottom in high yield, we would expect to see signs of improvement if not at least some stabilization in the deteriorating bond prices among those most struggling in the universe. On the other hand, if we see a further deterioration of bond prices with more companies entering the higher risk categories, this would suggest that we would need to need to see a wave of defaults wash over the sector before we can begin to put the worst of the current decline behind us.
The following is the current status of those companies most at risk in the high yield universe.
Triage
As of the last writing one month ago, we had 11 publicly traded companies that were trading at a more than 75% discount to par. Since that time, two names have fallen into a terminal state, as Arch Coal has since declared bankruptcy and Penn... Read more