Also, is it really accurate to call a company "clearly creditworthy" if a 2-3 month gap in cash flow results in bankruptcy? Surely the CFO can get down on his knees and find some spare change under the couch cushions to get through this.
Exactly. No one forced them to take on loans and then operate their balance sheets like they'd always be able to revolve bonds.
We are also talking about companies with specious "assets" and incredibly fragile businesses.
> Should we let clearly creditworthy companies go bankrupt because the credit markets are temporarily closed?
No, but they are not all creditworthy. Do you happen to know the ratio between the two? It seems to me that is a rather important data point that a logical person should be examining as part of their decision making process.
There two major assumptions there.
"Clearly creditworthy companies"
and
"Credit markets are temporarily closed"
The bonds are devalued. People are issuing credit to those who qualify. (I've secured two LOCs myself for both my business and personal needs.)
It's just that the bar is higher than normal. What is the function of a market if you don't allow it to clear?
These aren't sound businesses, because the current virus is going to screw them.
And if you think the market is correctly pricing the equity, you can't turn around and say it's mispricing the bonds so the Fed has to "correct it".
I mean, circular reasoning is one level of stupidity, but getting it going with a counterfactual is just enraging to me.