[rlucas]

True but also not true.

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.

[tptacek]

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.

[rlucas]

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!

[tptacek]

The Fed bought the bonds on the open market. You negotiate the sticker price of a new car. You don't negotiate the price of a can of Coke.

[cinquemb]

> The Fed bought the bonds on the open market

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

[0]: https://pastebin.com/raw/warjCE4M

[rlucas]

Are you suggesting that the Fed was strictly a price-taker and so de minimus that it had no price effect? In which case, why did the Fed get involved?

[tptacek]

Because the intervention they were applying was based on a broad market index, not a specific concern for Walmart.