The secured bond market - a new trend?

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As the joint loans move maturities, companies have been refinancing them by issuing bonds (some $60 billion of HY issuance has been used to pay downbound 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 famous names, had to ingest a trick to stimulate investors. As the confirmatory 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 joint bonds which are general obligations of the company, these bonds have specific confirmatory committed against them. Nearly 40% of past stick issuance has been in secured bonds.

The chart below shows that such bonds were mostly used as a refinancing tool (instead of capital investments or acquisitions.)



source: Thomson Reuters


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


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