So it begins, LBO loan defaults is expected to increase significantly. It is only logical that will happen due to weak due diligence and overzealous bankers to earn fees and do deals. I have wrote about this earlier in several posts, see here.
With the credit crises in full swing, some of those LBO deals that need funding for refinancing purposes would not be able to get any cash leading to defaults. Also LBO deals like PHH, SLM and others that have failed to close for lack of financing could dent confidence in LBO deals further. Moreover investors are no willing to invest in those deals as some of the LBO debt was not sold and sits on Bank's balance sheets.
All in all avoid high yield debt markets and issues at all cost no matter what the spreads are. The time to buy them is not now, as their risk reward pay off is not enticing.