What I Learned This Week

The corporate bond market appears dangerously complacent about the zombie threat.

Last year, Surgery Partners—a heavily-indebted network of outpatient clinics majority-owned by Bain Capital—refinanced CCC-rated bonds at a 10% interest rate. By March, with the COVID outbreak beginning, investors braced for Surgery to default, plunging the price of those bonds below 55 cents on the dollar. Then, the Fed announced plans to buy risky corporate debt. Not only have Surgery’s refinanced bonds now rebounded near par, but the company successfully raised another $120 million at a lower interest rate—9%—than they secured last year. COVID-19 continues to rage across America. Corporate profits are plunging. Companies are rapidly drawing down on existing lines of credit. Debt downgrad…

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