You're Leveraged? How Gauche!

If debt was the height of fashion during the Roaring Eighties, it has become, just one month into the 1990s, painfully passe. The securities issued by companies that loaded up on leverage to do deals during the '80s are now taking their lumps on Wall Street as investors shift their money to less- indebted companies.

No securities have been hit harder than junk bonds. The $200 billion market fell 7% in value during the last quarter of 1989. It suffered another blow last week when the credit-rating agency Moody's suddenly downgraded some debt issued by RJR Nabisco, which went private in a $25 billion buyout last year. The RJR securities had been viewed as among the most solid junk bonds. But investors were quick to flee; in two days, many RJR bonds lost $200 for each $1,000 of face value.

Stocks have been slammed too. Harcourt Brace Jovanovich, a publishing company that borrowed $2.1 billion last May to repel a takeover attempt by British tycoon Robert Maxwell, has suffered a slump in its stock price from 5 to 2 just since Jan. 1. Time Warner, which has nearly $11 billion in debt from Time Inc.'s acquisition of Warner Communications, has seen its stock fall from 124 at the beginning of the year to 103 1/8 last week. The shares of Stone Container, a paper manufacturer that borrowed $2.2 billion to buy a Canadian competitor last March, have declined from 25 1/8 to 21 1/2 this year. Wall Street's message is clear. During the '90s, companies are likely to pare down their debts and return to an old-fashioned way of raising money: by issuing stock.