LBOs remain vulnerable to restructuring, says Pimco’s Jessop
The current low default rate in the high yield market does not tell the full story, the executive vice-president and portfolio manager at Pimco tells Credit.
A large number of covenant-lite loans used to finance leveraged buyouts in the latter stages of the credit bubble are not refinanceable, according to Andrew Jessop, executive vice-president and portfolio manager at Pimco.
After reaching a peak of 13.5% in November 2009, Moody’s Investors Service’s trailing 12-month global speculative grade default rate fell to 5.5% in July. The agency predicts the default rate will fall to just 1.8% at the end of July 2011.
However, Jessop, who manages $23.6
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