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

Advisor fighting Finra banishment loses $17.7 million dispute with old firm
Advisor fighting Finra banishment loses $17.7 million dispute with old firm

National Securities Corp. sued the advisor in 2020, alleging breach of contract and unjust enrichment.

Job numbers, inflation leaving room for Fed to hold rates
Job numbers, inflation leaving room for Fed to hold rates

Recent data support a measured pace by the Federal Reserve for the year ahead.

Private assets remain hot despite surging stock market
Private assets remain hot despite surging stock market

Financial advisors are still adding alternatives despite the surge in publicly traded stock prices

Farther adds $120M firm with science-backed approach to wealth management
Farther adds $120M firm with science-backed approach to wealth management

The latest addition to the tech-driven firm combines wellness and finances.

Cutting back on fun: a third of Americans plan to reduce spending on vices
Cutting back on fun: a third of Americans plan to reduce spending on vices

Your clients are likely to be spending on vices, depending on their generation.

SPONSORED Taylor Matthews on what's behind Farther's rapid growth

From 'no clients' to reshaping wealth management, Farther blends tech and trust to deliver family-office experience at scale.

SPONSORED Why wealth advisors should care about the future of federal tax policy

Blue Vault features expert strategies to harness for maximum client advantage.