Debt has an obvious cost: the interest rate on a bond or loan.
Credit-default swaps can be bought as protection against the default of a bond or loan, or they can be sold to create some income in exchange for guaranteeing a credit exposure.
The Fed also cut the discount rate, which it charges banks for overnight loans, 50 basis points to 5.25%, a sign the central bank is still concerned about the lingering effects of a credit crunch that has rocked the bond and loan markets.
However, two years ago issuers were utilizing the high-yield market to address looming loan maturities by a greater degree, with 32% of supply backing bond-for-loan takeouts while 22% was for bond refinancing.
But now they need new income streams following the decline in share sales, which together with bond sales and loan-advisory business account for the revenue banks make from the capital markets.
Nor did increasing flows of retail money into both loan and bond mutual funds.
These include bond-for-loan takeouts, amend-to-extend exercises, and loans to refinance shorter-dated loans.
Issuers will continue to do bond-for-loan takeouts markets permitting.
FORBES: May 2012, European Leveraged Loan Market Trends and Analysis
Among the companies rolling over bond maturities were TXU , SandRidge Energy , and Steel Dynamics , while notable bond-for-loan takeouts were launched by Caesars Entertainment , Community Health , First Data , and Univision Communications .
Credit (a loan or a bond) is not generally acceptable as a means of payment.
Proceeds from the new bank loan, the bond sales and the Fiat investment will be used to repay the government loans.
Unlike a stock or bond, for which you loan money to an entity with the expectation of earning a return for the risk you took, buying commodities is like buying physical assets.
Bonds allow the borrower to only pay the interest while having the use of the entire amount of the loan until the bond matures in 20 or 30 years (when the entire amount must be returned at maturity).
Cheap credit, lax loan terms and willing bond buyers fueled the dealmaking frenzy and then shared the blame for driving many companies under.
If leveraged loan and high yield bond issuance continues at the current pace the leveraged finance market would see its first trillion dollar year.
FORBES: Leveraged finance volume sees record pace as M&A deals boom
And as long as rates stay up, forget about loan prepayments that result in your bond getting called away.
For example, JP Morgan (JPM) or Bank of America (BAC) took in Spanish bonds as collateral that MF Global had just purchased and made a loan that matured concurrently with the bond maturity date.
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But neither party is willing to tell the IRS to cut the nonsense and stop pretending that there is a difference between owning a term loan, a revolving working capital loan, commercial paper or a bond.
FORBES: How Washington Starves Small Business Of Foreign Capital
The magazine went further to suggest that they hope the package will convince the markets that loan commitments will cover the potential bond losses and contain the issue from spreading into Portugal and, perhaps more dangerously, into Spain.
We think many traditional euro area banks see the LTRO as a repo and partial covered bond replacement, but with limited scope for loan growth, with the backdrop of deleveraging the amount used for increasing balance sheets likely to be limited.
FORBES: ECB's Liquidity Injection Doesn't Justify This Rally, Could Derail It
As if to prove their point, the bond ratings agencies noted that delinquencies in the prime loan market had risen, but not by as much and not nearly at the magnitude of the subprime sector.
Excluded from bond markets last year, and with a short-term loan from Russia fast running out, Cyprus had to ask for help.
The average credit rating of a typical High Yield Corporate bond portfolio is higher than that of the Credit Suisse Leveraged Loan Index.
FORBES: Bank Loans vs. High Yield Bonds And The Hunt For Safety
Indeed, after evenly splitting the leveraged finance pie in January there was roughly twice as much loan volume last month as there was high yield bond issuance.
FORBES: Leveraged finance volume sees record pace as M&A deals boom
But this is only half the picture: if it succeeded in ending deflation, the Bank of Japan would help to reduce banks' losses on their loan portfolios, which are bigger than those on their bond portfolios.
The apocalyptic tax consequence of being a passive investor in small business loans stops virtually all foreign investors from participating directly in the U.S. small business loan market while driving their investment dollars into the corporate bond market.
FORBES: How Washington Starves Small Business Of Foreign Capital
This month, banks are putting the finishing touches to a euro525m loan to finance the business, and at more beneficial rates than the bond used to buy out Hoechst.
Just as Mr Becker proposes that a worker would be able to buy his loan off his present employer if he decided to change jobs, the bond in the Caribbean could also be bought off.
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