Vulture funds will need to stretch their wings. Corporate defaults are falling, despite the surprising endurance of the pandemic. Investors that specialise in buying distressed debt like Oaktree will have to look beyond the mainstay of public debt markets.
The last two decades have been a golden era for financial crises, yet life is getting harder for funds who take control of troubled companies by buying their bonds or loans. Covid-19 did trigger some big failures, like rental car company Hertz
It’s part of a longer-term trend. High government debt levels mean central banks need to keep interest rates low, helping even shaky companies raise funds. Barring severe shutdowns from new coronavirus variants, 2022 may be even more stress-free. The proportion of U.S. loans trading below 80% of face value, an indicator of likely default, was just 1.12% in November, according to an index tracked by Leveraged Commentary & Data.
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