Open Thread: Bear Stearns

Wednesday, August 08, 2007 | 06:30 PM

On last night's Kudlow & Company, I took some heat for my criticism of David Malpass' ill-timed WSJ Op-Ed (The "Chutzpah" of Bear Stearns).

Then today, 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

Here's my question for the assembled multitudes:

How much has this entire credit issue dinged Bear Stearns?
Has their Reputation been badly stained?
What about their Liquidity and Creditworthiness?
What other liabilities are on their books we may be unaware of?
Can they still attract and retain top talent?

I do not know the answers to any of these questions . . .


Bear Stearns (BSC), Daily Chart, One Year


And for the record, neither I, nor my firm or its clients, has any position, long or short, in Bear Stearns (BSC).

What say ye?

Wednesday, August 08, 2007 | 06:30 PM | Permalink | Comments (39) | TrackBack (0) add to | digg digg this! | technorati add to technorati | email email this post



TrackBack URL for this entry:

Listed below are links to weblogs that reference Open Thread: Bear Stearns :


Bare Sterns took it in the tail? How appropriate. Let's not forget that all the torpedos have yet to reach the convoy. Rig for silent running Fritz!

Posted by: Ross | Aug 8, 2007 6:39:21 PM

The comments to this entry are closed.

Recent Posts

December 2008
Sun Mon Tue Wed Thu Fri Sat
  1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
28 29 30 31      


Complete Archives List



Category Cloud

On the Nightstand

On the Nightstand

 Subscribe in a reader

Get The Big Picture!
Enter your email address:

Read our privacy policy

Essays & Effluvia

The Apprenticed Investor

Apprenticed Investor

About Me

About Me
email me

Favorite Posts

Tools and Feeds

AddThis Social Bookmark Button

Add to Google Reader or Homepage

Subscribe to The Big Picture

Powered by FeedBurner

Add to Technorati Favorites


My Wishlist

Worth Perusing

Worth Perusing

mp3s Spinning

MP3s Spinning

My Photo



Odds & Ends

Site by Moxie Design Studios™