Trouble in paradise
Healthy balance sheets, swollen liquidity reserves and positive cashflows should be the words every bondholder wants to hear, but they could spell bad news for credit investors in the US as companies prepare to reward equityholders
Since the brutal credit bear market of 2001 and 2002, companies have worked diligently to patch up neglected balance sheets through cost-cutting and debt reduction measures, focusing on liquidity and bondholder value. As a result, credit quality has steadily improved, default rates are at their lows and corporate cash reserves have ballooned. But one of the great paradoxes of today's credit markets is that the current health of corporate America's balance sheets does not augur well for
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