Bond issuance a debtor's prison

It has gotten easier for corporations to issue bonds, but it is still mighty expensive for companies with outstanding debt that don't have a great credit rating.
OCT 11, 2009
It has gotten easier for corporations to issue bonds, but it is still mighty expensive for companies with outstanding debt that don't have a great credit rating. High-risk premiums on bonds, especially within the speculative-grade universe, have put companies with pending debt at a disadvantage, according to a report this month from Standard & Poor's. Although investment-grade and speculative-grade spreads have compressed by 60% from their peaks last December, many companies still face higher rates on newly issued debt. A review of 30 companies that have both newly issued three- to seven-year bonds and similar bonds maturing this year shows that the average coupon rate — the interest that a company must pay — has increased about 35 basis points for companies rated triple-B or lower, according to S&P. That may be true, but the mere fact that companies are issuing junk bonds is a big improvement over last year when, after Lehman Brothers Holdings Inc. collapsed, no one was willing to sell such bonds, said Scott L. Barbee, managing director and portfolio manager of the $13.1 million Aegis High Yield Fund (AHYFX), offered by Aegis Financial Corp. “I think the fact we are seeing new issuance come to market now is evident that the window for funding for companies with less-than-stellar credit is improving,” said Mr. Barbee, whose fund has a five-star rating from Morningstar Inc.

Latest News

Maryland bars advisor over charging excessive fees to clients
Maryland bars advisor over charging excessive fees to clients

Blue Anchor Capital Management and Pickett also purchased “highly aggressive and volatile” securities, according to the order.

Wave of SEC appointments signals regulatory shift with implications for financial advisors
Wave of SEC appointments signals regulatory shift with implications for financial advisors

Reshuffle provides strong indication of where the regulator's priorities now lie.

US insurers want to take a larger slice of the retirement market through the RIA channel
US insurers want to take a larger slice of the retirement market through the RIA channel

Goldman Sachs Asset Management report reveals sharpened focus on annuities.

Why DA Davidson's wealth vice chairman still follows his dad's investment advice
Why DA Davidson's wealth vice chairman still follows his dad's investment advice

Ahead of Father's Day, InvestmentNews speaks with Andrew Crowell.

401(k) participants seek advice, but few turn to financial advisors
401(k) participants seek advice, but few turn to financial advisors

Cerulli research finds nearly two-thirds of active retirement plan participants are unadvised, opening a potential engagement opportunity.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today’s choppy market waters, says Myles Lambert, Brighthouse Financial.

SPONSORED Beyond the dashboard: Making wealth tech human

How intelliflo aims to solve advisors' top tech headaches—without sacrificing the personal touch clients crave