For over 12 years following the financial crisis, the free cash flow yield of stocks was mostly at or above the after-tax cost of high-yield debt, which established a promising environment for buying equity with borrowed money. Private equity investors took full advantage of this fundraising, but now that rising rates are looming, the consequences are beginning to show.
In this white paper, Private Equity’s Debt, Public Equity’s Problem?, Empirical Research Partners focuses on the yields on leveraged loans, floating rate mutual funds and ETFs, and the significant decline of high-yield debt issuance to determine the risk of a recession.
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