Energy Bonds Breach Distressed Level Amid Oil Selloff
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The average borrowing cost on junk-rated energy bonds reached distressed levels for the first time in at least three years as plunging oil prices threaten to cut into the revenue of companies exposed to the commodity.
The extra yield premium investors demand to hold energy company debt rather than government securities surged to 10.2 percentage points today in New York, past the 10 percentage-point limit considered distressed, according to data compiled by Bloomberg. About $280 billion of securities linked to 488 bonds across all industries trade as distressed compared with about 150 bonds six months ago.