Oaktree’s Marks Sees Uptick in Company Defaults Amid High Rates
Howard Marks, the co-founder of Oaktree Capital Management, is warning that companies are increasingly defaulting on their debt as interest rates remain high. The veteran investor said that the current environment is a “dangerous” one for corporate debt, and that investors should be cautious when investing in the sector.
High Interest Rates
Interest rates have been on the rise in recent years, and this has had a significant impact on the corporate debt market. Companies are finding it increasingly difficult to service their debt, and many are defaulting on their obligations. This has led to a rise in corporate defaults, and Marks believes that this trend is likely to continue in the near future.
Risk of Default
Marks believes that the risk of default is particularly high in the current environment. He noted that companies are taking on more debt than ever before, and that this is making them more vulnerable to default. He also warned that companies are increasingly relying on short-term debt to finance their operations, which makes them more susceptible to default if interest rates rise.
Investor Caution
Marks is urging investors to be cautious when investing in the corporate debt market. He believes that investors should be aware of the risks associated with investing in the sector, and should be prepared to take losses if necessary. He also noted that investors should be wary of companies that are taking on too much debt, as this could lead to a default.
Oaktree’s Investment Strategy
Oaktree has adopted a conservative investment strategy in response to the current environment. The firm has shifted its focus away from high-yield debt and is now focusing on more conservative investments such as distressed debt and special situations. The firm is also investing in companies that have strong balance sheets and are less likely to default on their debt.
Default Rates
Marks believes that the default rate in the corporate debt market is likely to remain high in the near future. He noted that the current environment is a “dangerous” one for corporate debt, and that investors should be cautious when investing in the sector. He also warned that companies are increasingly relying on short-term debt to finance their operations, which makes them more susceptible to default if interest rates rise.
Conclusion
Howard Marks of Oaktree Capital Management is warning that companies are increasingly defaulting on their debt as interest rates remain high. He believes that the risk of default is particularly high in the current environment, and is urging investors to be cautious when investing in the corporate debt market. Oaktree has adopted a conservative investment strategy in response to the current environment, and Marks believes that the default rate in the corporate debt market is likely to remain high in the near future.