emg home
Serbia good investment destination Government cooperates with DRI in creating report on 2008 budget control "Macroeconomic stability not in danger" More than 240 exhibitors to display in Romanian Travel Show FYROM: China donates computer equipment to Defense Ministry 'Tobacco boss' Sejdiu sentenced to 5-year imprisonment Wanted terrorist arrested in Sarajevo FBiH PA House of Representatives discussed the report of the audit office for 2008 budget execution Switzerland to end pension payout to people in Kosmet Eurozone bags Greek rescue deal to involve IMF NBRM reduces bills interest rate by 1% Gruevski-Papandreou meeting in Brussels Samaras to EPP: No to IMF involvement Croatian PM says government hasn't yet mulled withdrawing genocide lawsuit Bulgaria: Discussion of Anti-crisis Measures continues Eurostat Director Pieter Everaers visits Bosnia and Herzegovina to discuss census Inzko: Defense property must be settled for further progress towards NATO France welcomed the meeting of Tadic and Josipovic Telekom Srbija worth EUR 3.5bn US charges car firm Daimler with violating bribery laws Fuele: The issue of borders part of regional cooperation Serbian, Austrian economic ministries sign MoU Slovakian Party apologizes to Serbia for bombing Serbian MoD: Defense industry should not be sold Serbia remembering NATO aggression eleven years later Jeremic presents challenges of Serbia's diplomacy New era in relations of two countries and whole region Government to hold session Public debate on draft law on accreditation Dulic to sign agreements with eight banks Basic police training centre’s students to become police cadets Ministers agree to intensify cooperation in region

News Archive

NYTimes predicts financial apocalypse in 2012

19. March 2010. | 08:20

Source: MIA, New York Times

2012 also is the beginning of a three-year period in which more than $700 billion in risky, high-yield corporate debt begins to come due, an extraordinary surge that some analysts fear could overload the debt markets, US newspaper "The New York Times" says.

When the Mayans envisioned the world coming to an end in 2012 - at least in the Hollywood telling - they didn't count junk bonds among the perils that would lead to worldwide disaster.

Maybe they should have, because 2012 also is the beginning of a three-year period in which more than $700 billion in risky, high-yield corporate debt begins to come due, an extraordinary surge that some analysts fear could overload the debt markets, US newspaper "The New York Times" says.

With huge bills about to hit corporations and the federal government around the same time, the worry is that some companies will have trouble getting new loans, spurring defaults and a wave of bankruptcies.

The United States government alone will need to borrow nearly $2 trillion in 2012, to bridge the projected budget deficit for that year and to refinance existing debt, the daily estimates.

Indeed, worries about the growth of national, or sovereign, debt prompted Moody’s Investors Service to warn on Monday that the United States and other Western nations were moving “substantially” closer to losing their top-notch Aaa credit ratings.

Sovereign debt aside, the approaching scramble for corporate financing could strain the broader economy as jobs are cut, consumer spending is scaled back and credit is tightened for both consumers and businesses.

The apocalyptic talk is not limited to perpetual bears and the rest of the doom-and-gloom crowd. Even Moody’s, which is known for its sober public statements, is sounding the alarm.

"An avalanche is brewing in 2012 and beyond if companies don’t get out in front of this," said Kevin Cassidy, a senior credit officer at Moody’s.

Private equity firms and many nonfinancial companies were able to borrow on easy terms until the credit crisis hit in 2007, but not until 2012 does the long-delayed reckoning begin for a series of leveraged buyouts and other deals that preceded the crisis.

That is because the record number of bonds and loans that were issued to finance those transactions typically come due in five to seven years, said Diane Vazza, head of global fixed-income research at Standard & Poor’s.

In addition, she said, many companies whose debt matured in 2009 and 2010 have been able to extend their loans, but the extra breathing room is only adding to the bill for 2012 and after.

The result is a potential financial doomsday, or what bond analysts call a maturity wall. From $21 billion due this year, junk bonds are set to mature at a rate of $155 billion in 2012, $212 billion in 2013 and $338 billion in 2014.

The credit markets have gradually returned to normal since the financial crisis, particularly in recent months, making more loans available to companies and signaling confidence in the pace of economic recovery. But the issue is whether they can absorb the coming surge in demand for credit.

As was the case with the collapse of the subprime mortgage market three years ago, derivatives played a big role in the explosion of risky corporate debt. In this case the culprit was a financial instrument called a collateralized loan obligation, which helped issuers repackage corporate loans much as subprime mortgages were sliced, diced and then resold to other investors.

That made many more risky loans available, "The New York Times" says.


My Web

Enter text:


22. March - 28. March 2010.