WSJ PRO Bankruptcy | Biswas’s Take: Distressed-Debt Investor Sees More Healthy Company Debt at Risk of Falling to Junk Status

By December 7, 2017November 20th, 2019In The News

Report by Highland Capital sees cracks emerging in retail, telecom and media sectors that could spell trouble ahead if investors turn more risk-averse

Even as the stock market reaches new highs and the U.S. economy picks up steam, industries such as retail, telecommunications and media are facing a surprising amount of disruption that could spell trouble ahead for currently healthy companies in those sectors if the investing climate sours, according to a recent report.

Default rates are low right now, but there are signs of faint cracks ​in those sectors that point to a risk that investment-grade companies could see their debt fall into speculative-grade or junk territory if and when investors become more risk-averse, according to the report, which was unveiled at a press conference Tuesday by distressed-debt investment firm Highland Capital Management LP.

According to the Highland report, more industries are facing cyclical or secular challenges today than in 2015, when four troubled sectors accounted for $87 billion in U.S. dollar-denominated leveraged loans. The most troubled industries then were energy, metals and mining, which together were the source of $49 billion of these loans, or 5% of the total, according to the report. The manufacturing sector seemed at that time to be weakening, but it accounted for only $37.7 billion, or 4% of the total…

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