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Seminar paper from the year 2008 in the subject Business economics - Investment and Finance, grade: 1,3, The FOM University of Applied Sciences, Hamburg, course: Master of Business Administration (MBA), 24 entries in the bibliography, language: English, abstract: Financing the activities of companies is nowadays one of the most important challenges in Corporate Finance. More and more companies and investors use Junk Bonds as a stable part of their financial sourcing activities in Corporate Finance. The use of Junk Bonds is as a source for financing such activities like takeovers, merger and acquisitions, and restructuring instead financing activities by conventional bank credits established. This tool provides benefits and risks to both parties - buyers and issuers. The assignment at hand surveys some information about the role of Junk Bonds in Corporate Finance by focusing on risks and benefits from different perspectives.
Seminar paper from the year 2016 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 1,3, The FOM University of Applied Sciences, Hamburg, language: English, abstract: With this paper I would like examine the role of junk bonds in corporate finance. Starting with the term “Corporate Finance” in general, enlarging upon the objectives as well as long term and short term decisions of this field, the assignment continues by defining junk bonds and by giving an insight into the field of so called Fallen Angels. As the expansion of the junk bond market over the last decades has proceeded, I would like to take this occasion to provide background information about the changing role of high-yield bonds during the years. In the last chapter of this paper I will elaborate on the role of junk bonds in corporate finance and as part of the portfolio. Companies in the United States and elsewhere are increasingly turning towards the bond markets as a predominant source of corporate finance referring to changing market conditions. Various reasons such as merger and acquisition activities, capital expenditures, or working capital needs, have contributed to the fact that corporate entities have always needed funds. During the decades, high-yield bonds have survived a dramatic rise and fall in popularity and heated controversy to the limit. The leveraged finance market as a segment of the general credit market, involves issuers, usually considered more risky and with a lower credit ranking than its counterparts, as well as investors, expecting a higher rate on return potential. Investors are attracted to many forms of bonds, but one threat, concerning all leveraged finance investors is that they all have a comparatively high return objective. Many analysts still hold back from the analyst of junk bonds, which can be a result of the bond’s rating that is below the investment grade and therefore known as having very high investment risks. However, the potential rewards of this specific field of credit analysis are worth the time invested. A new emission volume has been pushed by debt financing activities and maintained by high investor demands, looking for yield in the consisting low interest rate environments.
Essay aus dem Jahr 2009 im Fachbereich BWL - Investition und Finanzierung, Note: 1,7, FOM Hochschule für Oekonomie und Management gemeinnützige GmbH, Hochschulstudienzentrum Hamburg, Sprache: Deutsch, Abstract: Junk bonds in corporate finance seen from the perspective of an issuer and an investor define the assignment scope. Giving both some hints when to use junk bonds is the main question to this assignment. From the issuer point of view it is important to have safeguarding mechanism inside a bonds contract. Having a callable option on the bond is target number one. Information have to be past to the investor, putting the notice about the high interest rate into the view of the investor. Information around the issuing firm according her actual economical status and her strategy are the most important source for any decision an investor should have before buying a junk bond. Taking care of an issuer safe guarding mechanisms could be a big pitfall to an investment. Taking a close look to the portfolio will help to find the right proportion for junk bonds regarding the selected return.
The junk bond, the fastest growing financial instrument of the 1980s, as been linked to all that is wrong with Wall Street. But in Junk Bonds, economist Glenn Yago argues that, despite the bad press, these high yield securities are still one of the most efficient and equitable ways for American companies to finance their futures. Yago points out that, before junk bonds, conservative investors like insurance companies, pension funds, and bank trust departments placed their capital primarily in investment-grade securities--and only five percent of the American companies with sales over $35 million qualify to issue investment grade bonds. In effect, ninety-five percent of the nation's mid-sized firms were frozen out of the public debt market. Junk bonds changed all that. In addition, Yago argues that the much-maligned divestitures associated with junk bond-funded buyouts were not necessarily destructive; many sold-off units, he writes, flourished under new management structures. Yago concludes that we have witnessed a fundamental restructuring of corporate America, made possible in part by high yield financing. The result is a bright future as American businesses return to productivity and competitiveness, one that will benefit managers, stockholders, and workers alike.
Since financial myths exploded in the 1980s, the perspective of time creates a unique opportunity to update and expand the analysis begun in Glenn Yago's 1991 book, Junk Bonds: How High Yield Securities Restructured Corporate America (Oxford University Press). At the time of its publication, Junk Bonds drew controversial responses from the Federal Reserve and government agencies. In retrospect, the evidence clearly casts favorable light on the role of high yield securities. The research presented here demonstrates how financial innovations enabled capital access for industrial restructuring, capital and labor productivity gains, and improved global competitiveness. Enough time has now passed to allow this dispassionate empirical analysis to shear away the hype and hysteria that surrounded the Wall Street scandals, Washington controversies, and media frenzy of the time. Beyond Junk Bonds provides a one-stop data, reference and case study presentation of the firms and securities in the contemporary high yield market and the financial innovations that spurred growth in the nineties and will continue to finance the future. The high yield market incubated successive waves of financial technologies that now proliferate beyond junk bonds to all the dimensions and dynamics of global debt and equity capital markets. It charts the recovery of the market in the 1990s, the recent wave of fallen angels, distressed credits and defaults, and suggests how the high yield market will be recreated in the global market of the 21st century. It explicates the linkages between the high yield market, and other credit and equity markets in managing a firm's capital structure to execute its business strategy. The weakening of the U. S. economy in 2001 and the huge shock to Wall Street from the terrorist attacks of September 11 witnessed a historic increase in the yield to maturity of high yield bonds. Despite the volatility in the flow of funds to high yield mutual funds and occasionally sharp increases in non-investment grade debt yields, the asset class has been one of the best performing fixed income investments of the past decades. In fact, high yield bonds offer an attractive risk-reward ratio competitive with more traditional asset classes. Anyone active in corporate finance, financial institutions and capital markets will find this book a must read for interpreting and understanding the recent history both of the high yield marketplace and its interaction with private equity, public equity, and fixed income markets.
Unearth a Gold Mine in the $1 TRILLION Junk Bond Market “Few experts in this area have been willing to share their inside knowledge with the outside world. None have done it as well and as simply and clearly as Bob Levine has done in his new book.” —Joel Greenblatt, bestselling author of The Little Book That Beats the Market “A great book by a great investor. . . . [I] recommend this book to everyone who wants to acquire some invaluable horse sense about investing in high yield bonds.” —Martin S. Fridson, author of How to Be a Billionaire “This is the best book ever written on high yield corporate bond investing. Destined to become an instant classic. . . .” —Jack Malvey, Chief Global Markets Strategist, Bank of New York Mellon Corp. "A first-rate introduction and navigation guide to the high-yield world." —Reading the Markets “This well-written and occasionally humorous tutorial on investing in speculative-grade corporate debt covers the essential aspects of high-yield debt. . . . As a basic introduction to the high-yield debt market, the book can’t be beat.” —The Financial Analysts Journal Do you think of the junk bond market as an arena of chaos, a financial Wild West, a place to avoid at all costs? In How to Make Money with Junk Bonds, a pioneer of the junk bond business gives you the insight and information you need to lay that fear to rest—so that you can generate unprecedented profits in this $1 trillion market. Robert Levine has the credentials to lead both individual investors and the professionals just getting started in the junk bond market. At Nomura Corporate Research and Asset Management, his junk bond funds substantially outperformed both high yield and S&P indices for more than 18 years—and in this book he explains the method he used to achieve such remarkable results. Helping you pick high yield bonds that have a low possibility of default. How to Make Money with Junk Bonds covers: The difference between stocks and bonds—and where junk bonds fit between them in the risk spectrum How to conduct a thorough credit analysis—the key to making money in junk bonds How to evaluate market conditions—and decide when to invest and when to sit on the sidelines Why you should hire a portfolio manager—and how to select the best one for your needs How to invest like a pro—using Levine’s personal, proven investing method The junk bond market isn’t the scary place it used to be. Critical information is easier (and cheaper) to obtain, and transparency is greater than it was in the market’s early days. How to Make Money with Junk Bonds gives you the tools to root out strong, forward-looking companies poised for growth and generate a level of profitability impossible to achieve in other markets.
Details the rise and operation of the high yield debt market as illustrated by the "junk" bond.
Junk bonds have been portrayed as an important alternative source of debt finance for high-growth firms that rely extensively on bank debt. We investigate the role of junk bonds in corporate finance, using a sample of firms that issued junk bonds to pay down bank loans. Bank debt paydowns are the most frequent reason firms issue junk bonds. The junk bond issues typically follow operating earnings declines. Our tests indicate that the looser contractual restrictions in junk bonds enable the firms to maintain financial flexibility. Alternative explanations for the bond issues have no support.
A case study of a company that exemplified the 80s.