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Prentice Hall Frank Fabozzi Bond Markets Analysis_3

Tham khảo tài liệu 'prentice hall frank fabozzi bond markets analysis_3', tài chính - ngân hàng, đầu tư chứng khoán phục vụ nhu cầu học tập, nghiên cứu và làm việc hiệu quả | IBHKHH _ Ịx s 5 -. _. bỊỈỆỊRB_flMMI 1 55 11 R 4 CHAPTER Corporate Debt insruments EXHIBIT 7-6 Anheiiser Busch Sara Lee and Union Pacific Event Risk Fears . and Widening fie d Spr eads -i. _ . . 200 r 200 - X 200 -Q. 2 200 -co Q M 200 - 5 .2 200 - 200 -----Anheuser Busch -----Sara Lee -----Union Pacific Aug 88 Sep 88 Date Oct 88 Nov 88 Corporates are spread to the U.S. Treasury 8 7 8 due August 2017. Source N. R. Vijayarghavan and Randy Snook Takeover Event Risk and Corporate Bond Portfolio Management in Frank J. Fabozzi ed. Advances and Innovations in Bond and Mortgage Markets Chicago Probus Publishing 1989 p. 56. issuer voluntarily significantly increased their debt as a result of a leveraged buyout or a recapitalization and 2 issues that have been downgraded for other reasons. The latter issues are commonly referred to as fallen angels. In the early years of the high-yield market all the issues had a conventional structure that is the issues paid a fixed coupon rate and were term bonds. Today however there are more complex bond structures in the high-yield corporate bond sector particularly for bonds issued for LBO financing and recapitalizations producing higher debt. The structures we describe next have features that are more attractive to issuers. In an LBO or a recapitalization the heavy interest payment burden that the corporation assumes places severe cash flow constraints on the firm. To reduce this burden firms involved in LBOs and recapitalizations have issued bonds with deferred coupon structures that permit the issuer to avoid using cash to make interest pay- ments for a period of three to seven years. There are three types of deferred coupon structures 1 deferred-interest bonds 2 step-up bonds and 3 payment-in-kind ị bonds. i Deferred-interest bonds are the most common type of deferred coupon structure. Ệ These bonds sell at a deep discount and do not pay interest for an initial period typi- cally from three to seven years. Because no interest is .