Junking the automakers
How would the market cope if Ford or General Motors were downgraded to high yield? Some years ago this question would have been dismissed as pure speculation but following recent multiple-notch downgrades, it is now a very real issue. Oliver Holtaway and Hardeep Dhillon pose this question to members of the buy side and sell side
The sell side
In October, Standard & Poor’s downgraded General Motors from BBB to BBB- stable, leaving both Ford and GM on the cusp of junk status. On November 4, Moody’s downgraded GM one notch to Baa2 and GMAC one notch to Baa1, leaving both on stable outlook.
Two of the corporate bond market’s biggest issuers now have a total of $227 billion equivalent of outstanding bond debt – of which €50 billion is euro-denominated – poised to enter the high-yield space. The implications for
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