Michaels Stores On Bond Market “Death Watch” List

According to an article today on business news site MarketWatch (which was reprinted elsewhere, including the Wall Street Journal), the bond market is holding the equivalent of a death watch over Michaels Stores and several other companies.

MarketWatch reports that bonds issued by Michaels are trading for only $.24 for every $1 of their mature value. The article says that when bonds are being traded at this much of a discount off their face value, it means that the market is anticipating that the company is quite possibly going to be in default on the bonds soon, a situation that usually leads to bankruptcy court.

Bondholders typically recover an average of $.45 per $1 of face value in bankruptcy court, according to MarketWatch’s experts. Low prices mean that the market is trying to build in a profit cushion in event of a bankruptcy filing by the bond issuing company.

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