High Yield Debt E-Book

Rajay Bagaria

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Serie: Wiley Finance Editions
• Sprache: Englisch

Seitenzahl: 314

Veröffentlichungsjahr: 2016

Beschreibung

Examine the high yield market for a clear understanding of this evolving asset class

High Yield Debt is the one-stop resource for wealth advisors seeking an in-depth understanding of this misunderstood asset class. The high yield market provides a diverse opportunity set, including fixed and floating rate debt, high and low quality debt issues and both short- and long-term duration; but many fail to understand that not all high yield exposure is the same, and that different market segments and strategies work best at different points in the economic cycle. This guide addresses the confusion surrounding high yield debt. You'll find the information you need to decide whether or not to buy in to a high yield fund, and how to evaluate the opportunities and risks without getting lost in the jargon.

The U.S. corporate high yield market is worth $2.4 trillion—more than the stock markets of most developed countries. Market growth has increased the number of funds with high yield exposure, as well as the types of debt products available for investment. This book breaks it down into concrete terms, providing the answers advisors need to effectively evaluate the opportunities on offer.

• Understand the high yield asset class
• Learn the debt structures, performance and defaults
• Evaluate risk and investment opportunities
• Penetrate the jargon to make sense of high yield investment

Over 300 publicly traded funds provide exposure to U.S. high yield, but despite it's size and ubiquity, understanding of the asset class as a whole remains somewhat of a rarity—even among participants. A lack of transparency is partially to blame, but the market's evolution over the past fifteen years is the larger issue. High Yield Debt explains the modern high yield market in real terms, providing a much-needed resource for the savvy investor.

"Rajay Bagaria has written the first book that captures a 360 degree view of the high yield debt market. Whether you are an investor, investment banker, corporate lawyer, CFO or layperson simply trying to gain insights into the fundamentals of high yield debt, this book translates financial and legal concepts, trends and structures of high yield bonds and leveraged loans into a simple, understandable format. Mr. Bagaria’s book is a valuable resource for anyone involved in the new issue or secondary leveraged finance markets."
—Frank J. Lopez, Co-Head Global Capital Markets, Proskauer

"Bagaria does a great service for both high yield professionals and beginners by providing an accessible, well-written, insightful market primer."
—Steven Miller, Managing Director, S&P Capital IQ, Leveraged Commentary & Data

"High-Yield Debt - An Insider’s Guide to the Marketplace is a comprehensive book that provides an in-depth understanding of the history, growth, basics and details of high-debt and the high-yield market. The author gives insights that only an experienced professional can provide. The book will be invaluable to readers both starting out and knowledgeable about an important segment of corporate finance, dealing with concepts, structures and performance."
—Arthur Kaufman, Retired Partner, Fried, Frank, Harris, Shriver & Jacobson LLP / Member of Adjunct Faculty, Columbia Law School

Leseprobe

High Yield Debt

An Insider’s Guide to the Marketplace

RAJAY BAGARIA

This edition first published 2016 © 2016 Rajay Bagaria

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Library of Congress Cataloging-in-Publication Data

Names: Bagaria, Rajay, 1977– author. Title: High yield debt : an insider's guide to the marketplace / Rajay  Bagaria. Description: Hoboken : Wiley, 2016. | Includes index. Identifiers: 9781119134411 (hardback) Subjects: LCSH: Junk bonds. | Capital market. | Business cycles. | BISAC:  BUSINESS & ECONOMICS / Banks & Banking. Classification: LCC HG4651 .B294 2016 (print) LC record available at http://lccn.loc.gov/2015042482

A catalogue record for this book is available from the British Library.

ISBN 978-1-119-13441-1 (hbk) ISBN 978-1-119-13443-5 (ebk) ISBN 978-1-119-13442-8 (ebk) ISBN 978-1-119-23695-5 (ebk)

Cover Design: Wiley Cover Images: Egg Image: © Excentro/Shutterstock Unicycler Image: © ra2studio/Shutterstock

Contents

Preface

BEFORE YOU BEGIN

CONTACT

DISCLAIMER

NOTES

Acknowledgments

About the Author

NOTES

Foreword

Chapter 1: Development of the High Yield Industry

1.1 WHAT IS HIGH YIELD DEBT?

1.2 THE IMPORTANCE OF CREDIT RATINGS

1.3 THE ORIGINS OF HIGH YIELD

1.4 ADVENT OF THE LEVERAGED BUYOUT

1.5 JUNK BONDS

1.6 MARKET MATURATION AND GROWTH

1.7 HIGH YIELD TODAY

1.8 SUMMARY

NOTES

Chapter 2: High Yield Issuers

2.1 HIGH YIELD ISSUERS

2.2 CAPITAL STRUCTURE CONSIDERATIONS

2.3 CHOOSING BETWEEN HIGH YIELD BONDS AND LEVERAGED LOANS

2.4 HIGH YIELD ISSUERS BY INDUSTRY

2.5 PURPOSE OF HIGH YIELD DEBT

2.6 THE ROLE OF INVESTMENT BANKS

2.7 THE HIGH YIELD CAPITAL RAISING PROCESS

2.8 SUMMARY

NOTES

Chapter 3: Buying High Yield Debt

3.1 WHO CAN BUY HIGH YIELD BONDS?

3.2 WHO CAN BUY LEVERAGED LOANS?

3.3 BUYERS OF HIGH YIELD DEBT

3.4 INVESTMENT MANDATES IMPACT VOLATILITY

3.5 COLLATERALIZED LOAN OBLIGATIONS (CLOs)

3.6 IMPLICATIONS OF AN OTC MARKET

3.7 TRACKING HIGH YIELD LIQUIDITY

3.8 TOTAL RETURN SWAPS AND MARGIN FINANCE

3.9 SUMMARY

NOTES

Chapter 4: High Yield Financial Concepts

4.1 KEY ECONOMIC TERMS OF HIGH YIELD DEBT

4.2 HIGH YIELD CALL PROTECTION

4.3 FIXED VERSUS FLOATING RATE DEBT

4.4 BOND YIELDS, THE RISK-FREE RATE, AND CREDIT SPREADS

4.5 MORE ADVANCED YIELD AND SPREAD CONCEPTS

4.6 COMMON ISSUER METRICS TRACKED

4.7 SUMMARY

Chapter 5: Debt Structures

5.1 RANKING AND SUBORDINATION

5.2 OPERATING AND HOLDING COMPANIES

5.3 LEVERAGED LOAN STRUCTURES

5.4 HIGH YIELD BOND STRUCTURES

5.5 PAYMENT-IN-KIND DEBT

5.6 AHYDO

5.7 SUMMARY

NOTES

Chapter 6: Credit Agreements and Legal Considerations

6.1 LOAN CREDIT AGREEMENTS AND BOND INDENTURES

6.2 ROADMAP TO HIGH YIELD DOCUMENTATION

6.3 AFFIRMATIVE AND NEGATIVE COVENANTS

6.4 INCURRENCE-BASED VERSUS MAINTENANCE COVENANTS

6.5 COVENANT-LITE – WHAT DOES IT MEAN?

6.6 MORE ADVANCED CREDIT AGREEMENT PROVISIONS

6.7 SACRED RIGHTS AND BANKRUPTCY RESOLUTION

6.8 RECENT LEGISLATION

6.9 SUMMARY

NOTES

Chapter 7: High Yield Asset Class Performance

7.1 TOTAL RETURNS, VOLATILITY, AND THE SHARPE RATIO

7.2 COMPARATIVE ASSET CLASS PERFORMANCE

7.3 ANNUAL PERFORMANCE VARIATIONS

7.4 HIGH YIELD BOND AND LEVERAGED LOAN PRICE VOLATILITY

7.5 RETURNS BY RATINGS

7.6 BETA AND CORRELATION ANALYSIS

7.7 INTEREST RATE RISK

7.8 DEFAULTS AND RECOVERIES

7.9 SUMMARY

NOTES

Chapter 8: Assessing the Market Opportunity

8.1 SOURCES OF MARKET INFORMATION

8.2 HOW TO EVALUATE HIGH YIELD CREDIT SPREADS

8.3 PUTTING HISTORICAL CREDIT SPREADS INTO CONTEXT

8.4 TRACKING ISSUER FUNDAMENTALS

8.5 THE MATURITY WALL

8.6 MONITORING EXCESSIVE RISK-TAKING

8.7 HIGH YIELD SUPPLY AND DEMAND

8.8 SUMMARY

NOTES

Chapter 9: 1940 Act High Yield Investment Funds

9.1 THE INVESTMENT COMPANY ACT OF 1940

9.2 HIGH YIELD MUTUAL FUNDS

9.3 HIGH YIELD ETFs

9.4 HIGH YIELD CLOSED-END FUNDS

9.5 COMPARISON OF CLOSED-END AND OPEN-END FUND RETURNS

9.6 BUSINESS DEVELOPMENT COMPANIES

9.7 SUMMARY

NOTES

Chapter 10: Mezzanine Debt, Distressed Debt, and Credit Hedge Funds

10.1 PRIVATE INVESTMENT FUNDS

10.2 MEZZANINE DEBT FUNDS

10.3 DISTRESSED DEBT FUNDS

10.4 CREDIT HEDGE FUNDS

10.5 SUMMARY

Glossary

Index

EULA

List of Tables

Chapter 1

TABLE 1.1

Chapter 2

TABLE 2.1

TABLE 2.2

Chapter 3

TABLE 3.1

TABLE 3.2

TABLE 3.3

TABLE 3.4

Chapter 4

TABLE 4.1

TABLE 4.2

Chapter 6

TABLE 6.1

Chapter 7

TABLE 7.1

TABLE 7.2

TABLE 7.3

TABLE 7.4

TABLE 7.5

TABLE 7.6

TABLE 7.7

TABLE 7.8

Chapter 8

TABLE 8.1

TABLE 8.2

Chapter 9

TABLE 9.1

TABLE 9.2

TABLE 9.3

TABLE 9.4

TABLE 9.5

TABLE 9.6

TABLE 9.7

TABLE 9.8

TABLE 9.9

List of Illustrations

Chapter 1

FIGURE 1.1

Trends in LBO Equity Contribution Since 1987

FIGURE 1.2

High Yield Debt Outstanding

Chapter 2

FIGURE 2.1

High Yield Capital Structures

FIGURE 2.2

New Issue Loan Volume vs. Annual Default Rates

Chapter 3

FIGURE 3.1

High Yield Bond and Leveraged Loan Buyers

Chapter 4

FIGURE 4.1

Risk-Free/Risk Premium Yield Components over Time

Chapter 5

FIGURE 5.1

Capital Structure with Opco and Holdco Debt Obligations

FIGURE 5.2

High Yield Bond Issuance by Debt Type

Chapter 8

FIGURE 8.1

Quarterly EBITDA Growth

FIGURE 8.2

Large Corp. LBO Leverage and Cash Interest Coverage

FIGURE 8.3

High Yield Market Maturity Wall

FIGURE 8.4

Lower Rated Debt Issuance for High Yield Bonds and Leveraged Loans – B/CCC or Lower

FIGURE 8.5

Institutional Loan Forward Calendar

Guide

Cover

Table of Contents

Preface

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