Open Thread: Bear Stearns

On Tuesday night's Kudlow & Company, I took some heat for my criticism of David Malpass' ill-timed WSJ Op-Ed (The "Chutzpah" of Bear Stearns (BSC)). Then Wednesday, I read in Marketbeat that Bear took it in the tail in the credit markets:

Bear Stearns Pays a Heavy Price
For an indication of how less forgiving the corporate bond market has become, look no further than Bear Stearns’ $2.25 billion bond sale on Tuesday. The Wall Street investment bank, which last week fought to dispel rumors of
liquidity problems, proved it still had access to the capital markets when it sold new five-year bonds. But the interest rates it had to pay investors raised some eyebrows.

The bonds were priced to yield 2.45 percentage points above yields on Treasury bonds, half a percentage point above existing Bear Stearns bonds that also come due in 2012.

Just two months ago, a junk bond rated “B” was yielding that same 2.45 percentage points over Treasurys, a record low.  The so-called spread on junk bonds has since jumped to 4.18 percentage points. Bear sports an “A+” credit rating, but appears to be paying a lot more than most “A”  corporate bonds, which are currently yielding 1.25 percentage points more than Treasurys, according to a Merrill Lynch index.

The hefty rates Bear is paying on its new bonds illustrate “a willingness to secure liquidity at any price,”
analysts from Banc of America Securities noted in a report. The large premium also implies that other companies that want to tap the investment-grade bond market may have to pay significantly higher rates, they added. (emphasis added)
-Mark Gongloff,  Marketbeat  http://blogs.wsj.com/marketbeat/2007/08/08/bear-stearns-pays-a-heavy-price/
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