The extreme thirst for yield has pushed the US high yield (non-investment grade corporate debt) cycle into uncharted territory with the stock of debt outstanding and the average leverage ratio expanding significantly beyond the previous 2007 profit cycle peak. The cycle is approaching the shakeout phase. The recent widening of spreads, triggered by commodity market dislocation, is unlikely to remain siloed as interlinked funding mechanisms react to accelerating bankruptcies. We have identified short opportunities amongst the beneficiaries of the current cycle, the issuers that have applied the funds to fast track corporate ambitions via capital spending, M&A and buybacks and, accordingly, attract a growth premium. Read our RESEARCH PAPER: (VIEW LINK)
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