Risky Borrowers Are Piling Into a Market Hungry for Junk

Too much money is chasing too few deals in the leveraged finance market, allowing companies with even the highest default risk to pile on more leverage or save on their interest costs.

Debt-fueled buyouts that typically sustain the high-yield markets remain elusive. That means cash-rich buyers of leveraged loans and junk bonds are instead piling into refinancing deals and pushing down spreads. Many higher-quality companies have already cut their borrowing costs as much as the market will allow, driving investors to spend on deals in more speculative corners of the market.