Illustration: Aïda Amer/Axios

Forgoing public funding is a lot easier if you can tap private markets to get the money — which is exactly what a lot of troubled companies have been able to do.

Why it matters: In the early days of the crisis, while markets were plunging, strong companies borrowed billions of dollars in cash just because they could. Now, with markets looking much healthier, weaker companies are finding themselves able to issue new debt and equity in an attempt to avoid bankruptcy.

Exhibit A: Boeing asked for a $60 billion bailout when the crisis hit, and ended up with $17 billion of federal loans earmarked for it as part of the CARES Act. The company still hasn't recovered from its 737 MAX crisis, and none of its airline customers are buying planes in any case. But investors are happy to lend it money all the same.

  • Boeing accepted no government money, in the end. Instead, it comfortably raised an astonishing $25 billion in the private debt markets, with maturities stretching out as far as 2060.
  • The company's new $4.5 billion 10-year bond came at a yield of 5.15%, well below initial expectations that it would have to yield about 5.9%. Even the $3.5 billion 40-year bond pays less than 6%.

Airlines have also been raising private funds. There was $5 billion of new debt (subscription) for Delta, $2 billion of loans for Southwest alongside another $2 billion in new equity, and a $1 billion sale of new shares by United.

  • Airlines famously go bankrupt a lot. Delta only emerged from bankruptcy in 2007, for instance. But in this case, they seem to be able to continue raising money by borrowing against their assets, such as landing slots.
  • Bankruptcy makes it easier for airlines to cut union jobs and pensions, but those aren't the problem in this crisis.

Other troubled companies are also finding new money. The movie-theater chain AMC raised $500 million, for instance. And Carnival Cruises — which has announced that it will resume sailing on Aug. 1, despite grave concerns from the CDC — raised $6.25 billion.

The big picture: Junk-rated companies are able to issue new senior debt because previous lenders allowed them to. As Axios' Dion Rabouin has reported, loan covenants — the things that normally prevent existing lenders from being subordinated — weakened significantly in the run-up to the crisis. That has made it easier for companies to find new sources of funds.

The bottom line: The Fed has not yet started buying up corporate bonds. But by wading into the market and spending trillions of dollars on Treasury bonds and other risk-free assets, it has effectively unleashed billions of dollars of new money well down the credit spectrum.

Go deeper

Felix Salmon, author of Capital
Aug 6, 2020 - Economy & Business

The corporate victims of U.S.-China tensions

Illustration: Aïda Amer/Axios

The travails of TikTok are the most visible example of how the rapidly deteriorating relationship between the U.S. and China can evaporate tens of billions of dollars of corporate value.

Why it matters: When corporations find themselves at the mercy of politicians flexing their geopolitical muscles, they generally end up ruing the encounter.

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Aldo Perez of Jacob's Farms restocks corn at a farmers market in Benicia, Calif.. Photo: Jessica Christian/The San Francisco Chronicle via Getty Images

More farmers are declaring bankruptcy, despite a $7 billion injection from the Department of Agriculture to mitigate losses caused by the coronavirus pandemic, the Wall Street Journal reports.

Why it matters: Farmers found themselves at the center of industries hardest-hit by the crisis as the pandemic slashed commodity values, cut off supply chains and closed markets around the globe.

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Intercontinental Exchange to buy mortgage software provider Ellie Mae

Illustration: Aïda Amer/Axios

Intercontinental Exchange agreed to buy Ellie Mae, a Pleasanton, Calif.-based provider of mortgage finance software, from Thoma Bravo for $11 billion.

Why it matters: This is the largest acquisition ever for Intercontinental Exchange, as it only spent $8.2 billion to buy the New York Stock Exchange in 2012. It also pushes ICE much further into the mortgage finance market, following smaller deals for MERS (2016) and Simplifile (2019).

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