The secured bond market - a new trend?

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As the corporate loans move maturities, companies have been refinancing them by issuing bonds (some $60 1000000000 of HY issuance has been utilised to pay downbound loans this year). With obligation for fixed income continuing to assail on the upside, newborn stick issuance has been quite strong.

However whatever weaker, more leveraged, or inferior famous names, had to ingest a gimmick to stimulate investors. As the confirmatory pledged for loans got freed up (with loans effort repaid), the companies pledged it to the newborn stick holders. These are the so-called secured bonds, and unlike accepted corporate bonds which are general obligations of the company, these bonds have limited confirmatory pledged against them. Nearly 40% of past stick issuance has been in secured bonds.

The interpret beneath shows that much bonds were mostly utilised as a refinancing tool (instead of top investments or acquisitions.)



source: composer Reuters


The question ease relic whether this is a long-term trend. It would stingy that the leveraged give mart at least in part is effort replaced with secured bonds. But obligation 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 may become a temporary phenomenon.


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