> we should take national ownership in the company if they want us to buy their debt.
Equity is equity and debt is debt. The two things are different and serve different purposes. There is no reason to take equity in a company when all the company wants is a loan.
In normal times with well-functioning markets and non-distressed players, that's so.
But with distressed (or small or less creditworthy) players or at distressed times, it's extremely common for lenders to demand equity as a concession for making a loan. See PIKs, warrant coverage, convertible notes, etc.
Walmart is in no sense distressed, and the Fed owns a microscopic amount of their debt, as part of an effort to create a broad market index of corporate debt.
Clearly. But it's not as if demanding equity rights along side a debt financing is unprecedented. Certainly, it is a damn sight more precedented than the Fed buying corporate bonds!
That was facing a situation with no bids on many issuances from AAA to C rated CUSIPs.
And true, you don't negotiate the price of a can of Coke, but if people stopped buying Coke in masses, stores would be incentivized to lower their prices just so it can clear the shelves…
~46% of the IG market is rated BBB (which was the situation before the covid19 btw), where the overall market is trading over par by about 14% on average spells doom for anyone buying the IG market now and holding to maturity… unless you can sell at higher prices to the greater fool: FRBNY leveraging future tax payer money from the treasury lol
The situation is even worse with WMT senior unsecureds[0]: you have walmart paper coming due in 2040 trading at +150 that yields 5.625 from par (100), whose gonna wanna get in and hold those bags now to maturity? Nobody but FRBNY leveraging future tax payer money from the treasury lol
Consumers are already buying as much as they can from Walmart. There are shortages on items that are not being produced. Walmart is incurring on new debt because the upstream actors failed. It is a healthy business that will come back the moment the situation stabilizes.
Equity is equity and debt is debt. The two things are different and serve different purposes. There is no reason to take equity in a company when all the company wants is a loan.