Corporate Debt Markets Find Themselves in Arrears

Financial Times (02/21/08); Sender, Henny
Last year, the Bank of England completed a study that uncovered similarities in the subprime mortgage market and the leverage finance market, in which private equity companies raise capital to bankroll the acquisition of target companies. What both of those markets have in common is that lending standards have eroded in the past few years, partly as a result of banks repackaging debt and selling it to outside investors. As a result, there currently are mounting concerns that problems that have already unfolded with regard to mortgages could repeat in the corporate debt arena. In a recent report, Goldman Sachs economists wrote: "Since the first subprime scare nearly a year ago, credit conditions have tightened for all types of loans."