Jump to content

Ancedotal Evidence of Where We are in the Credit Cycle


jay21
 Share

Recommended Posts

I spend a lot of time thinking about the credit cycle and worrying about it turning.  I own NICK, which is a (great) subprime auto lender.  Delinquencies have been rising since their post-crisis lows.  Management has said that this is because of increased competition.  America's Car-Mart, another player in the subprime auto space, has noted an increase competition as well.

 

On a blog a follow, Distressed Debt Investing), the author has some concerns as well:

 

"I am definitely not a "perma-bear." But when I look out into the marketplace and see quite a few hold-co PIK toggle dividend deals getting done in drive-by fashion with 8 and 9 handles, it stands to reason that risk isn't being priced correctly in the market place."

 

However, Bernanke notes that lending remains tight at banks.  So, where are we?  I think that cycle could be turning in the sub-prime/non-investment grade market, meanwhile the prime market appears fine.

 

Any thoughts/observations?

Link to comment
Share on other sites

  • 2 months later...

I'll bump this because I came across a nice tidbit:

 

Bond covenant quality declines to lowest level since start of index. Our three-month rolling average Covenant Quality Index (CQI) deteriorated in January to 3.89 from 3.79 in December, resuming the erosion in covenant quality for North American high-yield bonds that began last July. Investors are assuming more risk despite less yield, as average spreads to benchmark yields have tightened. The CQI is “weak” on our five-point scale, in which 1.0 represents strong covenant protections and 5.0 the weakest (see CQ Scoring Key in the Appendix). We began tracking the CQI in January 2011.

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...