The secured bond market - a new trend?

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

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

The interpret below shows that such bonds were generally utilised as a refinancing tool (instead of capital investments or acquisitions.)



source: Thomson 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 whatever existing inventory is effort paying down. If the give syndication mart recovers, secured bonds may become a temporary phenomenon.


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