Japanese investors are plowing back into the same types of risky U.S. corporate-loan investments that caused them losses during the 2008 financial crisis.
They're pouring cash into loans to finance Burger King operator Restaurant Brands International Inc., hotel manager Hilton Worldwide Finance LLC and Caesars Entertainment Resort Properties LLC. They're snapping up pools of the debt that have been sliced into pieces of varying risk and return, and converted into yen-denominated securities.
The logic is simple: These buyers are desperate for a way to juice returns with local sovereign bonds yielding almost nothing, and speculative-grade loans offer more than five extra percentage points of compensation. Some analysts and investors say the desire for yield is blinding Japanese investors to the risks as U.S. regulators warn that underwriting standards have slipped too far.