D-day approaching
The day of reckoning in the credit markets (D-day, or Default Day) is looming, says Amy Falls. The question is not if but when and - as importantly - why?
It is common knowledge in financial circles that credit spreads are too tight and risk premium too low. Evidence of easy money abounds. New issue markets remain robust. Large cap leveraged buyout funds returned a staggering 29% on average over the four quarters ending June 2006, riding the wave of cheap, easy financing in the debt markets. And, in spite of 425 basis points of tightening in two years by the Federal Reserve, the cost of capital for even single-B and triple-C corporates remains at
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