Asset Class Weekly - M*A*S*H: A Report About High-Yield Bonds

"We act insane, because if we didn't, we would most surely become insane." -- Hawkeye Pierce, MASH: A Novel About Three Army Doctors, 1968
It has been another month since my last report in January from the war zone that is the high yield bond market. At the heart of the conflict was and remains the embattled energy sector, which has seen its share of the high yield bond market shrink from over 13% to below 9% due to the heavy casualties inflicted on the sector by the precipitous decline in oil prices. But with oil prices having stabilized at least for the moment and now trading a few dollars higher in the low $30 per barrel range, it is worthwhile to survey the battlefront and check on the wounded to see if we can identify any signs of improvement or if the situation is continuing to deteriorate.
As we have before, we will begin by checking on the wounded that are most at risk in the high yield bond space. What companies have since passed our last walk through, and who is still hanging on.
The Wounded
In January, we had 12 publicly traded companies that were trading at a more than 75% discount to par following the bankruptcy of Arch Coal and the delisting of Penn Virginia. Since that time, we saw paper company Verso enter into bankruptcy, reducing the list of names from the previous group by one. Given the developments over the past month, it is now worthwhile to divide this remaining group of at risk credits into two separate units.
The first is the... Read more