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The growing threat of a corporate bond market meltdown: “These things don’t happen overnight for companies. They happen overnight only for investors.”

The above quote comes from a WolfStreet article recapping Clover Technology’s leveraged-loan blow-up last month. A private equity-owned recycler of cell phones and inkjet cartridges, Clover had lost two key customers, a fact it did not have to share with creditors until the eleventh hour because the loan was covenant-lite. By the time Clover broke the news, it had already hired advisors in preparation for debt restructuring or bankruptcy. Investors rushed to unload Clover's debt—which totaled $693 million—only to run into a liquidity trap. Clover’s price chart illustrates what happened next: Source: Bloomberg For more than a year, we have dissected the systemic threat posed by record corporate debt (see WILTWs May 24, 2018, Septem...

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