The Five-Year Plan

We are approaching another “bubble” moment. This time it is in the high-yield market. On Tuesday, the WSJ reported that the yield on “Junk” is approaching an all-time low, falling below 7% for the first time in six years. “The quest for yield is extending a terrific run for junk bonds. They are already up 2.57% so far this year, following returns of 15.2% in 2010 and 57.5% in 2009, according to the Merrill Index.” And it is not only in the rate, covenant-light terms have returned evidencing the bargaining strength of the issuer.

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Early Earnings Solid, Led by the Newly Public

The first round of 2005 earnings has come in, and the results are solid overall. While tanker companies General Maritime and Teekay did not see revenues quite as strong as 1Q04, the results were certainly nothing at which to balk. OMI, International Shipholding and Kirby all posted increases across the board, with OMI’s results particularly strong, and consistent in the revenue, net income and EBITDA categories, as shown in the accompanying table. The real over-performers so far, not surprisingly, were the companies who have gone public and expanded their fleets substantially in the past year. DryShips saw revenue, net income and EBITDA all increase by more than 70% based on 1Q04, while Top Tankers saw returns more than quintuple in each of these three categories.