The secured bond market - a new trend?

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As the joint loans approach maturities, companies hit been refinancing them by supply bonds (some $60 1000000000 of HY issuance has been utilised to clear downbound loans this year). With demand for fixed income continuing to surprise on the upside, newborn stick issuance has been quite strong.

However whatever weaker, more leveraged, or inferior famous names, had to use a gimmick to stimulate investors. As the confirmatory committed for loans got freed up (with loans effort repaid), the companies committed it to the newborn stick holders. These are the so-called secured bonds, and unlike standard joint bonds which are generalized 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 below shows that such bonds were generally utilised as a refinancing tool (instead of top investments or acquisitions.)



source: composer Reuters


The discourse ease 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 paying down. If the give syndication mart recovers, secured bonds may embellish a temporary phenomenon.


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