2012 And The Debt Apocalypse: It's Comin'

The Mayan calendar ends in 2012, and supposedly those clever Mayans knew something we don’t. The NYT says that if the world does end in 2012 — it’ll spare us from a ridiculous junk bond debt avalanche.

From the NYT:

Private equity firms and many nonfinancial companies were able to borrow on easy terms until the credit crisis hit in 2007, but not until 2012 does the long-delayed reckoning begin for a series of leveraged buyouts and other deals that preceded the crisis.

That is because the record number of bonds and loans that were issued to finance those transactions typically come due in five to seven years, said Diane Vazza, head of global fixed-income research at Standard & Poor’s.

In addition, she said, many companies whose debt matured in 2009 and 2010 have been able to extend their loans, but the extra breathing room is only adding to the bill for 2012 and after.

The result is a potential financial doomsday, or what bond analysts call a maturity wall. From $21 billion due this year, junk bonds are set to mature at a rate of $155 billion in 2012, $212 billion in 2013 and $338 billion in 2014.

Not as visually interesting as a giant robot eating the Eiffel Tower because it thinks its a Popsicle, but still pretty scary.

Junk Bond Avalanche Looms for Credit Markets [NYT]