It's getting a bit spooky in here! Tomorrow could be a very interesting day in my opinion for two reasons:
1. Markets are really playing with fire by testing repeatedly the support levels from last November. Remember, the more frequently you test the support levels- the more likely they are going to fail
2. Tomorrow is also a very important day for many former LBO (leveraged buyout's targets).

Friday the 13th marks doomsday for many leveraged companies as they prepare to confirm to lenders whether or not they have breached covenants on their debt.

Most companies financed with riskier loans are given 45 days from the end of a quarter to confirm that they have met covenants. Debt specialists and private equity funds expect on Friday to mark the point from which a flood of covenant breaches will start coming through.

As an example Charter is expected to file Chapter 11 imminently ... The question now simply seems to be- what kind of damage will this do to the already struggling banks? According to FT:

Creditors face much bigger losses in the case of a default.

Senior lenders to leveraged buy-outs will probably recover only 51 per cent to 70 per cent of their invesment, according to Fitch Ratings, compared with 70 per cent to 90 per cent on previous estimates.

The question now seems to be simply- who is next and how much will it cost. Or may be the upcoming Valentine's Day will work it's charm once again, all of sudden the "evil" bankers realize that changing covenants on outstanding debt is a much easier way to retain some value for most of these LBO loans. Let's call this February 14th- the "fall in love with the bankers day!"

Stay safe out there and cheers, skepticalcapitalist@gmail.com