An Alternative to Bank Financing: High Yield
These emissions are those that have a risk rating called speculative, to be below a certain level called for investment-grade, and that the greatest theoretical risk of default, have a cost higher.
Among the factors that determine the major risks of these emissions are: (i) the level of indebtedness of the issuer, (ii) additional needs funding for expansion or acquisition, (iii) field of activity, with increased risk or competition, or (iv) lack of the issuer in the markets.
Potential investors are usually very professional investors, such investment funds, insurance companies, asset managers, hedge funds, and in general, professional investors that, in exchange for a higher level of risk, seeking higher returns.
Should not fall into the error of identifying the highest risk of these emissions, necessarily difficult financial situations, as among the issuers of bonds high yield are well known large companies and in Spain, ONO, Codere Campofrío Cirsa, Abengoa , OHL, among many others.
Emissions high yield normally be characterized as financing " bullet " (at maturity, 5, 7 or even 10 years), but also have a number of restrictions or obligations to do or not to do ("covenants") , these give greater flexibility to the issuer in its ordinary management that normally exist in bank financing. The bonds usually have guarantees real and personal of the subsidiaries of the issuer.
In Spain, the recent amendment of the Securities Market Act has eliminated the emission limit obligations for unlisted companies placements direct obligations, as in the case of emissions high yield, to (i) qualified investors (ii) investors subscribing for a minimum of 100,000 euros, or (iii) if the face value of the securities is at least 100,000 euros, allowing structure these broadcasts without society constitute a subsidiary or spv in another European jurisdiction, bringing down costs of issuance.
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