The secured bond market - a new trend?

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

However whatever weaker, more leveraged, or less known names, had to use a trick to entice investors. As the confirmatory committed for loans got freed up (with loans getting repaid), the companies committed it to the newborn stick holders. These are the so-called secured bonds, and different standard joint bonds which are generalized 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 much bonds were mostly utilised as a refinancing agency (instead of capital investments or acquisitions.)



source: Thomson Reuters


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


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