Corporate Distress Spreads; Energy Junk Is a Haven
The Credit Edge by Bloomberg Intelligence
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The High Yield Junk Energy Issue Is a Safe Haven in All of This Mess
In 2008, oil prices plunged from about $145 a barrel down to around 34 and as a result credit spreads in the energy sector did jump by quite a bit. That said, the sector then was still 300, 350 basis points tighter than the overall market despite that sort of dislocation. But if you look at leverage ratios today even after we've seen natural gas prices fall to $2 per 1,000 cubic feet just in August, all but one is expected to still generate positive free cash flow. So not to say that there won't be some dislocation, not to say the high yield energy sector won't suffer somewhat.
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