The secured bond market - a new trend?

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As the corporate loans move maturities, companies hit been refinancing them by supply bonds (some $60 1000000000 of HY issuance has been used to pay down loans this year). With demand for immobile income continuing to assail on the upside, new stick issuance has been quite strong.

However whatever weaker, more leveraged, or inferior known names, had to ingest a trick to stimulate investors. As the collateral committed for loans got freed up (with loans effort repaid), the companies committed it to the new stick holders. These are the so-called secured bonds, and unlike accepted corporate bonds which are generalized obligations of the company, these bonds hit specific collateral committed against them. Nearly 40% of past stick issuance has been in secured bonds.

The chart below shows that much bonds were generally used as a refinancing tool (instead of top investments or acquisitions.)



source: Thomson Reuters


The question still relic whether this is a long-term trend. It would mean that the leveraged give mart at small in conception is effort replaced with secured bonds. But demand for leveraged loans also continues to be high, especially as whatever existing inventory is effort paid down. If the give syndication mart recovers, secured bonds haw embellish a temporary phenomenon.


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