ent banking house Drexel Burnham Lambert played a major role in the development of the junk bond market (Worthy, 1987, p. 59). The successful public marketing of high yield, high risk bonds issued by the textile manufacturer, Milliken & Company, provided a major impetus in the development of the junk bond market.
Drexel Burnham Lambert continued to be a major player in the development of the junk bond market. In fact, the firm publishes and index of 110 leading junk bonds, and is a major focus of attention in the leveraged buyout market (Worthy, 1987, p. 59).
The original impetus for the development of the junk bond market was provided by the combination of the bull market which began in August 1982, and the recovery from the recession of the early 1980s, which began in 1983. The combination of these factors lessened the risk of default for investors, while providing the issuers of the junk bonds a basis for a belief that the promised high returns could be sustained.
The leveraged buyout boom of the early to mid 1980s provided a second strong impetus for the further development of the junk bond market (Worthy, 1987, p. 59). Leveraged buyout artists, such as Ivan Boesky, found that junk bonds were an almost ideal way, in the pre October 1987 crash environment, to finance their transactions (Worthy, 1987, p. 59). The growth of the junk bond market took off, with its application to leveraged buyout deals in the mid 1980s.
Junk bonds promise a high return, on a high risk. The success of the
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