This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Bernanke Feeding Market a Junk Debt Diet: Street Whispers

Booming debt markets have also helped private equity giants line up financing for buyouts or to alleviate pressures on existing debt saddled investments.

On Monday, private equity giant Permira said it would buy (ACOM) for $1.6 billion, while media reports also indicated Cerberus Capital Management may buy struggling supermarket chain Supervalu (SVU - Get Report).

Other highly watched prospective private deals include Bloomberg reports that KKR, TPG and Bain Capital may bid for software maker BMC Software (BMC) and a well publicized campaign by Best Buy's (BBY - Get Report) co-founder Richard Schulze to take over the struggling electronics retailer. Both prospective deals hinge on readily available debt financing.

An October Moody's report indicates private equity firms can also use pre-crisis like debt markets to pay themselves giant dividends, seen in big recent announcements made by Booz Allen Hamilton (BAH), Warner Chilcott (WCRX) and HCA (HCA), among others.

Still, as Fitch Ratings warns in its Monday report, booming junk debt markets aren't a panacea for cash strapped companies or for the broader economy. Were growth not to return, eventually something has to give.

"The Fed's efforts to revive the economy and a positive resolution to the U.S. fiscal cliff remain critical even as the heightened demand for yield product is allowing more highly levered and vulnerable companies to access the debt markets," writes Fitch. "A more robust economic environment is especially important over the next several years as the liquidity boost from record issuance diminishes," the agency adds.

For more on how Fed policies are causing investors to rethink their 2012 playbook, see why Warren Buffett's Wells Fargo investment hinges on Bernanke and why bank stocks may face Fed destruction in 2013 .

-- Written by Antoine Gara in New York

2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
BMC $0.00 0.00%
BAC $15.56 -1.46%
BBY $36.46 -1.96%
S $5.11 0.20%
SVU $11.10 -2.29%


DOW 17,826.30 -279.47 -1.54%
S&P 500 2,081.18 -23.81 -1.13%
NASDAQ 4,931.8150 -75.9760 -1.52%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs