Morning all,
Just a quick post to welcome in the new month.
DEBT DEBT DEBT
I think debt is going to be the story of May. I don’t want to focus on Boeing, but I saw this article and the number is startling, $25 billion in bond offerings!!!
I don’t know of a good info source for listing of new corporate debt issuance but I will find one as many companies are at this but I’ve haven’t seen discussion about its future market effect and I think it certainly warrants more attention.
In the case of Boeing, some of these bonds have a 40 year duration. This is not just short-term cashflow lending to get through the pandemic, it’s structural debt that is going to sit on the balance sheet for decades to come and that has implications for profits, future capex, credit ratings, dividend policies etc.
Markets seem to be expecting a V-shape recovery, but what happens when you take your increasingly debt-laden balance sheet into a recession that doesn’t bounce with a V? Layoffs, cost cutting and bankruptcies spring to mind.
I’ll be doing some work on the level of debt increase going on so expect more posts on this through the month.
Stay safe, thanks for your time.
$SPX500 $DJ30 $NSDQ100 $BA
