Debt Woes Spill Over to Equity Markets
While the mortgage and housing markets have garnered much recent attention, the lack of easy credit is impacting all markets.
The Wall Street Journal has posted a scorecard, showing how the problems in the credit market have caused more than two-dozen debt offerings to be either delayed or pulled in the last month.
Among the more notable deals that have been impacted is Cerberus Capital’s offering for Chrysler debt and the Alliance Boots deal, both of which failed to price this week.
Meanwhile, Credit Sights projects that this weakness in the CLO market could have an impact on equity markets as well.
One primary driver of the bull run in stocks has been the private equity bid, along with re-leveraging trades by firms in order to avoid an LBO or to mollify increasingly militant shareholders. That the equity market is sensitive to this spillover effect was evident in the sell off earlier in the week as firms like Expedia announced plans to dramatically reduce planned buybacks because of the inability to access financing at an acceptable rate.
It’s been evident in recent weeks that damage would not be limited to the subprime market. This week’s market selloff suggests the spillover has reached equity markets as well.
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