{"id":493996,"date":"2022-09-18T04:50:24","date_gmt":"2022-09-18T01:50:24","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/cruel-winter-ahead-for-wall-street-as-pandemic-debts-come-due\/"},"modified":"2022-09-18T04:50:24","modified_gmt":"2022-09-18T01:50:24","slug":"cruel-winter-ahead-for-wall-street-as-pandemic-debts-come-due","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/cruel-winter-ahead-for-wall-street-as-pandemic-debts-come-due\/","title":{"rendered":"#Cruel winter ahead for Wall Street as pandemic debts come due"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a4032b2ccb2e\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a4032b2ccb2e\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/cruel-winter-ahead-for-wall-street-as-pandemic-debts-come-due\/#%E2%80%9CCruel_winter_ahead_for_Wall_Street_as_pandemic_debts_come_due%E2%80%9D\" >&#8220;Cruel winter ahead for Wall Street as pandemic debts come due&#8221;<\/a><ul class='ez-toc-list-level-2' ><li class='ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/cruel-winter-ahead-for-wall-street-as-pandemic-debts-come-due\/#Recession_looms\" >Recession looms<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/cruel-winter-ahead-for-wall-street-as-pandemic-debts-come-due\/#The_good_news\" >The good news<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/buradabiliyorum.com\/en\/cruel-winter-ahead-for-wall-street-as-pandemic-debts-come-due\/#Inflation_spiral\" >Inflation spiral<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h1><span class=\"ez-toc-section\" id=\"%E2%80%9CCruel_winter_ahead_for_Wall_Street_as_pandemic_debts_come_due%E2%80%9D\"><\/span>&#8220;Cruel winter ahead for Wall Street as pandemic debts come due&#8221;<span class=\"ez-toc-section-end\"><\/span><\/h1>\n<div>\n<aside class=\"single__inline-module alignleft\">\n<div class=\"inline-module inline-module--columnist inline-module--author\">\n<div class=\"inline-module--author__img\">\n            <img decoding=\"async\" width=\"76\" height=\"69\" src=\"https:\/\/nypost.com\/wp-content\/uploads\/sites\/2\/2013\/08\/Gasparino_Charles_headshot.png?w=76&amp;h=69&amp;crop=1\" class=\"attachment-nyp_columnist size-nyp_columnist\" alt=\"Charles Gasparino\" loading=\"lazy\" srcset=\"https:\/\/nypost.com\/wp-content\/uploads\/sites\/2\/2013\/08\/Gasparino_Charles_headshot.png?w=152 152w, https:\/\/nypost.com\/wp-content\/uploads\/sites\/2\/2013\/08\/Gasparino_Charles_headshot.png?w=114 114w, https:\/\/nypost.com\/wp-content\/uploads\/sites\/2\/2013\/08\/Gasparino_Charles_headshot.png?w=76 76w, https:\/\/nypost.com\/wp-content\/uploads\/sites\/2\/2013\/08\/Gasparino_Charles_headshot.png?w=38 38w, https:\/\/nypost.com\/wp-content\/uploads\/sites\/2\/2013\/08\/Gasparino_Charles_headshot.png 706w\" sizes=\"auto, (max-width: 76px) 100vw, 76px\"\/>      <\/div>\n<\/div>\n<\/aside>\n<p>A banker recently told me that CEOs \u201cwould have to do something pretty special to fall into bankruptcy\u201d the last couple of years as government pumped massive liquidity into the market, on top of the pandemic handouts.<\/p>\n<p>That\u2019s now changing, possibly quickly, with the Fed raising interest rates and reducing the size of its balance sheet.<\/p>\n<p>A cruel winter is likely for Wall Street as markets remain choppy and their biggest clients scale back. Traditional deal-making such as IPOs has dropped significantly. At every major investment house, management is quietly planning layoffs (and some, like Goldman Sachs, not so quietly).<\/p>\n<p>One area of potential growth: Wall Street restructuring departments. They\u2019re eyeing expansion to provide advice to companies so burdened by high debt load they need to sell stuff or \u201crestructure\u201d in Chapter 11 bankruptcy.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Recession_looms\"><\/span>Recession looms<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Sources tell me investment banking firm Morgan Stanley is weighing a big expansion of its restructuring team (Morgan Stanley wouldn\u2019t deny the matter). Other banks are likely to follow because none of this is really rocket <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/sciencee\/\" data-internallinksmanager029f6b8e52c=\"5\" title=\"Science\" target=\"_blank\" rel=\"noopener\">science<\/a>.<\/p>\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"683\" src=\"https:\/\/nypost.com\/wp-content\/uploads\/sites\/2\/2022\/09\/AP19100577987644.jpg?w=1024\" alt=\"Other large firms are likely to follow Morgan Stanley's move.\" class=\"wp-image-23907056\" srcset=\"https:\/\/nypost.com\/wp-content\/uploads\/sites\/2\/2022\/09\/AP19100577987644.jpg?quality=75&amp;strip=all&amp;w=2048 2048w, https:\/\/nypost.com\/wp-content\/uploads\/sites\/2\/2022\/09\/AP19100577987644.jpg?quality=75&amp;strip=all&amp;w=1536 1536w, https:\/\/nypost.com\/wp-content\/uploads\/sites\/2\/2022\/09\/AP19100577987644.jpg?quality=75&amp;strip=all 1024w, https:\/\/nypost.com\/wp-content\/uploads\/sites\/2\/2022\/09\/AP19100577987644.jpg?quality=75&amp;strip=all&amp;w=512 512w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\"\/><figcaption>Morgan Stanley CEO and Chairman James Gorman is reportedly weighing a big expansion of its restructuring team.<\/figcaption><figcaption><span class=\"credit\">AP<\/span><\/figcaption><\/figure>\n<p>If you think the Fed needs to raise rates by a lot (which, given the latest inflation number, it does) the economy will suffer. Recession looms. The likelihood is that some segments of corporate America loaded up on cheap debt and will need help avoiding bankruptcy \u2014 or navigating a way out of it. That becomes a big business for Wall Street.<\/p>\n<aside class=\"single__inline-module alignright\">\n    <\/aside>\n<p>The unwinding of the credit cycle to tighter lending standards is always pretty tough on corporate balance sheets, but it could be particularly brutal this time given the monetary policy experiment \u2014 and corporate debt binge \u2014 of the past two-plus years, bankers tell me.<\/p>\n<p>Since the pandemic, even the most troubled companies had access to credit. So-called leveraged deal-making exploded. M&amp;A often leaned heavily on borrowing because the Fed provided so much easy money the banks were virtually giving loans away.<\/p>\n<p>What goes up ultimately comes down on Wall Street. The easy money of the early 2000s paved the way for the financial crisis of 2007-2008 with mortgage debt at the center of the deleveraging.<\/p>\n<p>The easy money of the pandemic economy has led to similar risk-taking among companies and investors. An unwind is guaranteed even if it is still unclear if it will reach such cataclysmic levels.<\/p>\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" loading=\"lazy\" width=\"1024\" height=\"683\" src=\"https:\/\/nypost.com\/wp-content\/uploads\/sites\/2\/2022\/09\/GettyImages-1424382360-1.jpg?w=1024\" alt=\"Stock prices have continued to decline in recent months.\" class=\"wp-image-23907073\" srcset=\"https:\/\/nypost.com\/wp-content\/uploads\/sites\/2\/2022\/09\/GettyImages-1424382360-1.jpg?quality=75&amp;strip=all&amp;w=2048 2048w, https:\/\/nypost.com\/wp-content\/uploads\/sites\/2\/2022\/09\/GettyImages-1424382360-1.jpg?quality=75&amp;strip=all&amp;w=1536 1536w, https:\/\/nypost.com\/wp-content\/uploads\/sites\/2\/2022\/09\/GettyImages-1424382360-1.jpg?quality=75&amp;strip=all 1024w, https:\/\/nypost.com\/wp-content\/uploads\/sites\/2\/2022\/09\/GettyImages-1424382360-1.jpg?quality=75&amp;strip=all&amp;w=512 512w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\"\/><figcaption>In previous years, the government pumped massive liquidity into the market.<\/figcaption><figcaption><span class=\"credit\">Getty Images<\/span><\/figcaption><\/figure>\n<p>Consider the $1.4 trillion-plus leveraged loan market, which comprises borrowings of the most indebted companies. Such debt has doubled in just seven years. More troubling, the biggest share of the market compromises loans to the riskiest credits. \u201cJunk\u201d credits now make up more than 28% of such loans, according to the data trackers at Morningstar.<\/p>\n<p>You see where I\u2019m going with this: As rates continue to spike, these borrowers will find it more difficult \u2014 maybe impossible \u2014 to refinance debt. Profit margins (if the companies are profitable) get squeezed as the economy slows. This Gordian knot translates into lower stock prices, layoffs, etc. Companies shed assets, and file for Chapter 11. Bondholders will be owners of chunks of corporate America because they have first lien on deteriorating assets, which means losses for major money managers and pensions.<\/p>\n<p>In the middle of this mess will be the restructuring departments of the big banks dispensing advice and earning fees for their time.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"The_good_news\"><\/span>The good news<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Some caveats to the doom-and-gloom scenario. Restructurings are beginning to pick up (See Revlon and Bad Bath &amp; Beyond) but they\u2019re not dominating the headlines because default rates remain low. The St. Louis Fed\u2019s index of all commercial bank loan delinquencies are well off the highs reached just after the banking crisis.<\/p>\n<aside class=\"single__inline-module alignright\">\n    <\/aside>\n<p>But bankers say the trouble looms when loan terms reach their end stages and so-called balloon principal payments come due. Those big numbers begin next year when more than $200 billion in leveraged loans will need refinancing, and will rise yearly by multiples until around $1 trillion is due in 2028, a banker tells me.<\/p>\n<p>That\u2019s a lot of debt to refinance in the face of tighter credit conditions. It\u2019s a recipe for recession, but also for money to be made by Wall Street restructuring shops.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Inflation_spiral\"><\/span>Inflation spiral<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>As bad as inflation is, there\u2019s a good chance it\u2019s going to get a lot worse. A serious nightmare scenario is starting to circulate among top Wall Street investors.<\/p>\n<p>It began with BlackRock CEO Larry Fink\u2019s grim assessment, explained in this column last week, that the Biden administration stoked significant inflation through reckless spending. It\u2019s now nearly impossible for the Fed to engineer a \u201csoft landing\u201d of the economy with inflation at 8.3%.<\/p>\n<p>Yet it could get worse. Global droughts and the continued war in Ukraine translate into declining crop yields and higher food prices. Gas prices might be coming down, but the administration <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>ears intent on keeping them high by canceling drilling permits. As workers demand higher wages (and railroad workers got one last week by threatening a strike) Fed Chair Jerome Powell cranks up interest rates until the economy lands in a crash.<\/p>\n<p>Dark stuff that some experts dispute, many of the same geniuses who said inflation was \u201ctransitory.\u201d\u00a0\n                        <\/p><\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/news\/\" target=\"_blank\" rel=\"noopener\">News category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/nypost.com\/2022\/09\/17\/cruel-winter-ahead-for-wall-street-as-pandemic-debts-come-due\/\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;Cruel winter ahead for Wall Street as pandemic debts come due&#8221; A banker recently told me that CEOs \u201cwould have to do something pretty special to fall into bankruptcy\u201d the last couple of years as government pumped massive liquidity into the market, on top of the pandemic handouts. That\u2019s now changing, possibly quickly, with the&#8230;<\/p>\n","protected":false},"author":1,"featured_media":493997,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/nypost.com\/wp-content\/uploads\/sites\/2\/2022\/09\/newspress-collage-23907028-1663461997270.jpg?quality=75&strip=all&1663447650&w=1024","fifu_image_alt":"","footnotes":""},"categories":[70897],"tags":[133361,70550,70790,73986,91261,70360],"class_list":["post-493996","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news","tag-9-17-22","tag-federal-reserve","tag-goldman-sachs","tag-morgan-stanley","tag-recession","tag-wall-street"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/493996","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=493996"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/493996\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/493997"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=493996"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=493996"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=493996"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}