The Titans of Junk Debt Turned Trash Into Bond-Market Treasure
Netflix—or “Debtflix,” if you prefer—Tesla, T-Mobile, and Dell borrowed billions in an era of historic low rates. They’ve been getting some timely upgrades.
The stock market in 2022 has been on a wild ride, as equity investors question whether companies can grow fast enough to justify lofty valuations. But in the junk-bond market, where the attention is focused on a company’s ability to pay its bills, the story is a bit different. Several major high-yield borrowers—including Netflix Inc., which has seen its share price cut by more than 25% this year—are close to or have recently won promotion from credit rating companies out of the junk pile and up to “investment grade.”
Netflix along with Dell, Tesla, and T-Mobile took advantage of the long era of low interest rates to borrow billions of dollars relatively cheaply from investors hungry for yield. And then the companies got help they couldn’t have expected: The Covid-19 pandemic and the Federal Reserve’s aggressive response to it extended the period of low rates and easy financial conditions, giving companies more breathing room to execute their plans.