Reply #9: Companies have not been in such shape since the Depression

[54anickel]

$88 billion in debt may become junk

http://www.chron.com/cs/CDA/ssistory.mpl/business/3387898

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Hertz Corp., the world's largest car rental firm, and radio broadcaster Clear Channel Communications are among 46 companies that probably will be categorized as noninvestment grade, according to credit-rating company Standard & Poor's.

A surge in debt-financed takeovers and concern that higher oil prices will hurt profit growth is eviscerating credit quality in the $5 trillion market for corporate bonds, according to some strategists.

Investors face greater risks, while companies once considered safe and now classified as so-called "fallen angels" may see borrowing costs rise.

Not since the Depression of 1929 has corporate America received so many black eyes. General Motors, the world's largest automaker, Sears Holdings Corp., the biggest U.S. department store chain, and Eastman Kodak Co., the largest photography company, led 27 borrowers whose $499 billion of outstanding debt obligations suffered the ignominy of being downgraded to junk.

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Fallen angels default at almost twice the rate of companies that never had investment-grade ratings, and seven of 10 stay junk, S&P said in a March study analyzing 24 years of data. The junk bond market is about $1 trillion in size.

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