Because of the spread of the Delta coronavirus variant, some investors backed away from handling the debt of pandemic-affected US firms. They did that after re-evaluating the pace at which the American economy is reopening amidst the spread of the new variant.
The bonds issued by retailers, cruise companies, and cinema operators all took a hit last week and more businesses delayed the reopening and/or postponed their plans to return their workers because of the Delta variant’s escalation.
Several companies have suffered lately because they opted to sell their bonds last year with the plan of surviving the initial wave of the outbreak, only to find out that the price of the bonds has been dropping in recent days.
Other firms, like BlackRock and Wells Fargo, see the future in joining technology titans like Amazon (which will generate $26 billion in global advertising revenue during this year alone). to keep operations flowing until staff could return to offices. Transport companies, like United Airlines, also raised their concerns because of the new variant and are quickly making vaccines mandatory for all staff by autumn.
Brandywine Global Investment Management expert, John McClain, states that investors are in fact getting nervous and pointed out that they should look for similar examples around the globe to assess the possible outcomes of possible Delta spikes.
However, McClain doesn’t really see these recent jitters as detrimental events that will ruin the outlook for all corporate players on the debt market.
Rather, he sees the Delta variant as a roadblock that needs to be taken into account and continues the path toward recovery without having to worry about bankruptcy (even though last year, chapter 11 business bankruptcies increased by 26%).
Not all companies would agree with McClain as the rise of Delta variant cases managed to affect some of these companies’ supply chains. Some of these companies, like Itron, have recently reported logistics constraints, component and raw material shortages that are related to the pandemic and the financial difficulties it produces.