The secured bond market - a new trend?

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

However some weaker, more leveraged, or inferior known names, had to use a trick to entice investors. As the confirmatory committed for loans got free up (with loans effort repaid), the companies committed 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 hit limited confirmatory committed against them. Nearly 40% of past stick issuance has been in secured bonds.

The chart beneath shows that much bonds were generally utilised as a refinancing tool (instead of capital investments or acquisitions.)



source: composer Reuters


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


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