1
 At a private dinner Thursday, Drexel Burnham Lambert Inc. chief executive Frederick Joseph delivered a sobering message about the junk bond market to officials of Prudential Insurance Co. of America.
5009
span

2
 Mr. Joseph conceded 
3
attribution

3
the junk market was in disarray,
5001
span

4
 according to people familiar with the discussion.
5001
attribution

5
 He said
5006
attribution

6
 Drexel
5003
span

7
 -- the leading underwriter of high-risk junk bonds --
6
elaboration-object-attribute-e

8
 could no longer afford to sell any junk offerings
5004
Same-Unit

9
 if they might later become troubled 
5004
circumstance

10
because Drexel risked losing its highly lucrative junk franchise.
5005
reason

11
 The dinner was a stark confirmation
5010
span

12
 that 1989 is the worst year ever for the $200 billion junk market.
11
elaboration-object-attribute-e

13
 And investors and traders alike say 
14
attribution

14
the current turmoil could take years to resolve.
5011
span

15
 Amid the market disorder, even Drexel,
5014
span

16
 which has the widest and most loyal following of junk bond investors,
15
elaboration-object-attribute-e

17
 is pulling in its horns.
5015
Same-Unit

18
 Although the big investment bank still dominates the junk market,
19
antithesis

19
 Drexel has been unable to stem the fallout from growing junk bond defaults, withdrawn new offerings, redemptions by shareholders in junk bond mutual funds and an exodus of once-devoted investors.
5016
span

20
 For many money managers, the past four months have been humiliating.
5021
span

21
 This is the worst shakeout ever in the junk market,
5019
List

22
 and it could take years before it's over,
5019
List

23
 says Mark Bachmann, a senior vice president at Standard & Poor's Corp., a credit rating company.
5019
attribution

24
 In the third quarter, for example, junk bonds
5023
span

25
 -- those with less than an investment-grade rating --
24
elaboration-object-attribute-e

26
 showed negative returns, the only major sector of the bond market
5022
span

27
 to do so.
26
elaboration-object-attribute-e

28
 Since the end of last year, junk bonds have been outperformed by all categories of investment-grade bonds,
5026
span

29
 including ultra-safe Treasury securities.
28
elaboration-set-member-e

30
 The junk market,
5029
span

31
 which mushroomed to $200 billion from less than $2 billion at the start of the decade,
30
elaboration-additional-e

32
 has been declining for months 
5028
span

33
as issuers have stumbled under the weight of hefty interest payments.
32
explanation-argumentative

34
 The fragile market received its biggest jolt last month from Campeau Corp.,
5034
span

35
 which created its U.S. retailing empire with more than $3 billion in junk financing.
34
elaboration-object-attribute-e

36
 Campeau developed a cash squeeze
5035
span

37
 that caused it to be tardy on some interest payments and to put its prestigious Bloomingdale's department store chain up for sale.
36
elaboration-object-attribute-e

38
 At that point, the junk market went into a tailspin
5038
span

39
 as buyers disappeared 
5037
List

40
and investors tried to sell.
5037
List

41
 In an interview, Mr. Joseph says
42
attribution

42
 his dinner discussion with the Prudential executives acknowledged problems for junk.
5042
span

43
 What I thought
5043
span

44
 I was saying 
43
elaboration-object-attribute-e

45
is that the market is troubled but still viable and, appropriately enough, quite quality-conscious,
5044
span

46
 which is not at all bad,
45
elaboration-object-attribute-e

47
 he says.
5045
attribution

48
 Nobody's been perfect in their credit judgments the past couple years,
5048
circumstance

49
 and we're going to make sure
50
attribution

50
 our default rates are going to be in the acceptable parameters of the market.
5048
span

51
 What has jolted many junk buyers is the sudden realization
5052
span

52
 that junk bonds cannot necessarily be bought and sold with the ease of common stocks and many investment-grade bonds.
51
elaboration-object-attribute-e

53
 Unlike the New York Stock Exchange,
5053
span

54
 where buyers and sellers are quickly matched,
53
elaboration-object-attribute-e

55
 the junk market,
5054
span

56
 where risky corporate loans are traded,
55
elaboration-object-attribute-e

57
 is sometimes closed for repairs.
5055
Same-Unit

58
 At closely held Deltec Securities Corp., junk bond money managers Amy K. Minella and Hannah H. Strasser say 
59
attribution

59
the problems of the junk market go deeper than a temporary malaise.
5057
span

60
 In recent months,
5059
span

61
 they say,
60
attribution-e

62
 there has been heavy selling of junk bonds by some of the market's traditional investors,
5060
Same-Unit

63
 while new buyers haven't materialized 
5058
span

64
to replace them.
63
purpose

65
 Wall Street securities firms, the primary source of liquidity for the high yield market, have been net sellers of junk bonds
5064
span

66
 because of trading losses,
65
explanation-argumentative

67
 Deltec said in a recent, grim report to customers.
5064
attribution

68
 Mutual funds have also been net sellers of junk bonds
5067
span

69
 as junk's relatively poor performance and negative press coverage have produced above-normal redemptions by shareholders,
68
explanation-argumentative

70
 Deltec said.
5067
attribution

71
 Investors,
5070
span

72
 trying to raise cash,
71
elaboration-object-attribute-e

73
 have sold large liquid issues such as RJR Holdings Corp. and Kroger Co.;
5071
Same-Unit

74
 declines in these benchmark issues have contributed to the market's distress.
5071
elaboration-additional

75
 And,
5075
span

76
 Deltec said,
75
attribution-e

77
 buying has been severely reduced 
5076
Same-Unit

78
because savings and loans have been restricted in their junk purchases by recently passed congressional legislation.
5079
span

79
 In fact, savings and loans were sellers of high yield holdings throughout the quarter, 
5078
span

80
Deltec said.
79
attribution

81
 Ms. Minella and Ms. Strasser say 
5082
attribution

82
they are managing their junk portfolios defensively,
5082
span

83
 building cash
5081
List

84
 and selectively upgrading the overall quality.
5081
List

85
 Meanwhile, Prudential, the nation's largest insurer and the biggest investor in junk bonds, has seen the value of its junk bond portfolio drop to $6.5 billion from $7 billion since August
5085
span

86
 because of falling junk prices.
85
result

87
 We certainly do have a lack of liquidity here,
5087
span

88
 and it's something 
5086
span

89
to be concerned about, 
88
elaboration-object-attribute-e

90
says James A. Gregoire, a managing director.
5087
attribution

91
 I have no reason 
5092
span

92
to think
93
attribution

93
 things will get worse,
5091
span

94
 but this market has a knack
5090
span

95
 for surprising us.
94
elaboration-object-attribute-e

96
 This market teaches us to be humble.
5097
span

97
 The junk market's yield hogs are learning a real painful lesson,
5096
span

98
 he says.
97
attribution

99
 Although the majority of junk bonds outstanding show no signs of default,
5100
concession

100
 the market has downgraded many junk issues 
5100
span

101
as if they were in trouble,
100
manner

102
 says Stuart Reese, manager of Aetna Life & Casualty Insurance Co. 's $17 billion investment-grade public bond portfolio.
5101
attribution

103
 But we think
5103
attribution

104
 the risks are there 
5103
span

105
for things getting a lot worse.
104
elaboration-object-attribute-e

106
 And the risks aren't appropriate for us,
5106
span

107
 he says.
106
attribution

108
 The big insurer, unlike Prudential, owns only about $150 million of publicly sold junk bonds.
5106
explanation-argumentative

109
 The string of big junk bond defaults,
5111
span

110
 which have been a major cause of the market's problems this year,
109
elaboration-object-attribute-e

111
 probably will persist,
5112
Same-Unit

112
 some analysts say.
5112
attribution

113
 If anything, we're going to see defaults increase 
5114
span

114
because credit ratings have declined,
113
explanation-argumentative

115
 says Paul Asquith, associate professor at the Massachusetts Institute of Technology's Sloan School of Management.
5114
attribution

116
 Mr. Asquith,
5119
span

117
 whose study on junk bond defaults caused a furor on Wall Street
5118
span

118
 when it was disclosed last April,
117
circumstance

119
 says
120
attribution

120
 this year's junk bond defaults already show a high correlation with his own findings.
5116
span

121
 His study showed
122
attribution

122
 that junk bonds over time had a cumulative default rate of 34%.
5121
span

123
 One indication of a growing number of junk defaults,
5124
span

124
 Mr. Asquith says,
123
attribution-e

125
 is that about half of the $3 billion of corporate bonds outstanding
5126
span

126
 that have been lowered to a default rating by S&P this year
125
elaboration-object-attribute-e

127
 are junk bonds
5123
span

128
 sold during the market's big issue years of 1984 through 1986.
127
elaboration-object-attribute-e

129
 These bonds,
5129
span

130
 now rated single-D,
129
elaboration-additional-e

131
 include junk offerings by AP Industries, Columbia Savings
5127
span

132
 (Colorado),
131
elaboration-additional-e

133
 First Texas Savings Association, Gilbraltar Financial Corp., Integrated Resources Inc., Metropolitan Broadcasting Corp., Resorts International Inc., Southmark Corp. and Vyquest Inc.
5128
Same-Unit

134
 Obviously, we got a lot more smoke than fire from the people
5133
span

135
 who told us
136
attribution

136
 the market wasn't so risky,
5132
span

137
 says Bradford Cornell, professor of finance at University of California's Anderson Graduate School of Management in Los Angeles.
5133
attribution

138
 Mr. Cornell has just completed a study 
5136
span

139
that finds 
140
attribution

140
that the risks and returns of junk bonds are less than on common stocks but more than on investment-grade bonds.
5135
span

141
 Mr. Cornell says:
5140
attribution

142
 The junk market is no bonanza
5139
span

143
 as Drexel claimed,
142
attribution

144
 but it also isn't a disaster 
5138
span

145
as the doomsayers say.
144
attribution

146
 Despite the junk market's problems,
5147
concession

147
 Drexel continues to enjoy a loyalty among junk bond investors
5147
span

148
 that its Wall Street rivals haven't found.
147
elaboration-object-attribute-e

149
 During the past three weeks, for example, Drexel has sold $1.3 billion of new junk bonds for Turner Broadcasting Co., Uniroyal Chemical, Continental Air and Duff & Phelps.
5148
evidence

150
 Still, the list of troubled Drexel bond offerings dwarfs that of any firm on Wall Street,
5150
span

151
 as does its successful offerings.
150
comparison

152
 Troubled Drexel-underwritten issues include Resorts International, Braniff, Integrated Resources, SCI TV, Gillette Holdings, Western Electric and Southmark.
5150
elaboration-additional

153
 Quality junk bonds will continue to trade well,
5153
span

154
 says Michael Holland, chairman of Salomon Brothers Asset Management Inc.
153
attribution

155
 But the deals
5154
span

156
 that never should have been brought
155
elaboration-object-attribute-e

157
 have now become nuclear waste.
5155
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5002
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1
elaboration-additional

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elaboration-additional

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5033
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multinuc
5017
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5016
span
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explanation-argumentative

5017
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5012
consequence-s

5018
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elaboration-additional

5019
multinuc
5020
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5020
span
5031
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span

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5024
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5024
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5024
multinuc
5027
List

5025
span



5026
span
5027
List

5027
multinuc
5020
evidence

5028
span
5030
Same-Unit

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span
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multinuc
5040
span

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span
20
elaboration-additional

5032
span



5033
span
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span

5034
span
5036
span

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span
5034
elaboration-additional

5036
span
5039
span

5037
multinuc
38
explanation-argumentative

5038
span
5036
consequence-s

5039
span
5030
elaboration-additional

5040
span
5021
elaboration-additional

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span
5013
elaboration-additional

5042
span
5047
span

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span
5045
Same-Unit

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span
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5045
multinuc
5046
span

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span
5042
elaboration-additional

5047
span
5050
span

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span
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span

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span
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elaboration-additional

5050
span
5033
elaboration-additional

5051
span
5146
span

5052
span
5056
span

5053
span
5055
Same-Unit

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span
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Same-Unit

5055
multinuc
5052
explanation-argumentative

5056
span
5063
span

5057
span
5062
span

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span
5061
Contrast

5059
span
5060
Same-Unit

5060
multinuc
5061
Contrast

5061
multinuc
5066
span

5062
span
5072
span

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span
5099
span

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span
5065
span

5065
span
5061
interpretation-s

5066
span
5057
elaboration-additional

5067
span
5068
span

5068
span
5062
elaboration-additional

5069
span



5070
span
5071
Same-Unit

5071
multinuc
5074
span

5072
span
5073
span

5073
span
5080
span

5074
span
5072
elaboration-additional

5075
span
5076
Same-Unit

5076
multinuc
5077
span

5077
span
5073
elaboration-additional

5078
span
78
elaboration-additional

5079
span
5076
explanation-argumentative

5080
span
5084
span

5081
multinuc
82
elaboration-additional

5082
span
5083
span

5083
span
5080
consequence-s

5084
span
5056
elaboration-additional

5085
span
5089
span

5086
span
87
elaboration-additional

5087
span
5088
span

5088
span
5095
span

5089
span
5063
elaboration-additional

5090
span
5093
Contrast

5091
span
91
elaboration-object-attribute-e

5092
span
5093
Contrast

5093
multinuc
5094
span

5094
span
5088
elaboration-additional

5095
span
5085
elaboration-additional

5096
span
96
elaboration-additional

5097
span
5093
interpretation-s

5098
span



5099
span
5110
span

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span
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span

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span
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span

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span
5109
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span
5104
span

5104
span
5108
span

5105
span



5106
span
5107
span

5107
span
5104
elaboration-additional

5108
span
5102
explanation-argumentative

5109
span
5099
elaboration-additional

5110
span
5145
span

5111
span
5112
Same-Unit

5112
multinuc
5113
span

5113
span
5117
span

5114
span
5115
span

5115
span
5143
span

5116
span
5120
Same-Unit

5117
span
5110
elaboration-additional

5118
span
116
elaboration-additional-e

5119
span
5120
Same-Unit

5120
multinuc
5122
span

5121
span
5131
span

5122
span
5115
elaboration-additional

5123
span
5125
Same-Unit

5124
span
5125
Same-Unit

5125
multinuc
5130
span

5126
span
5125
Same-Unit

5127
span
5128
Same-Unit

5128
multinuc
5125
elaboration-additional

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span
5128
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5130
span
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elaboration-additional

5131
span
5120
elaboration-additional

5132
span
134
elaboration-object-attribute-e

5133
span
5134
span

5134
span
5137
span

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span
138
elaboration-object-attribute-e

5136
span
5134
elaboration-additional

5137
span
5142
span

5138
span
5140
Contrast

5139
span
5140
Contrast

5140
multinuc
5141
span

5141
span
5137
elaboration-additional

5142
span
5143
antithesis

5143
span
5144
span

5144
span
5113
elaboration-additional

5145
span
5051
elaboration-additional

5146
span
5159
span

5147
span
5148
span

5148
span
5149
span

5149
span
5151
antithesis

5150
span
5151
span

5151
span
5152
span

5152
span
5157
span

5153
span
5155
antithesis

5154
span
5155
Same-Unit

5155
multinuc
5156
span

5156
span
5152
interpretation-s

5157
span
5146
elaboration-additional

5158
span



5159
span



