The amount of distressed debt in the U.S. has quadrupled in less than a week to nearly $1 trillion, reaching levels not seen since 2008 as the collapse of oil prices and fallout from the coronavirus shutters entire industries worldwide.
In total, the tally has ballooned to $934 billion of U.S. corporate bonds that yield at least 10 percentage points above Treasuries and loans that trade for less than 80 cents on the dollar, according to data compiled by Bloomberg. That's nearly double the amount from less than a week ago.
The total is probably even higher, because the calculation excludes debt of small- to medium-sized companies whose loans trade rarely, if at all.
The coronavirus pandemic has caused the worst sell-off since the global financial crisis and deepened stress in credit markets. Driven by some of the lowest oil prices since the early 2000s, the amount of distressed bonds has surged to the highest level since April 2009.
"What we are seeing now is fast and violent," unlike the gradual sell-off in the 2007 and 2008 crisis, said Phil Brendel, a senior distressed credit analyst at Bloomberg Intelligence. If the virus isn't suppressed, even more distress is possible, according to Mr. Brendel. "The worst is yet to come."
Distressed debt describes the borrowings of companies that are perceived to be under significant financial pressure, and often suggests there's considerable risk that the debtholders won't get paid everything they're owed.