At the time, the financing of these investments, to a large extent, was seen as prudent because the telecom borrowers had very high market valuation that could facilitate, if needed, a stock issuance take-out of bank and other debt. In the event, of course, prices of telecom stocks collapsed, and many firms went bankrupt.
In decades past, this situation would have been a recipe for severe financial distress. However, a significant amount of exposure to telecom debt had been laid off through credit risk mitigation instruments, such as credit default swaps, collateralized debt obligations, and credit-linked notes. This appears to have reduced telecom loan concentrations and the stress on banks and other financial institutions.