Millionaire Investors Catch Australia’s High-yield Express

kim kardashian

High-yield bond business is piping hot in Australia, based largely upon high demand from wealthy individuals. Two major factors that have triggered the high-yield effect. Higher capital costs have caused banks to take on less risk than usual in lending to unrated and otherwise unproven companies. Additionally, low interest rates globally have forced investors to take on more risk for decent returns.

Within the past year-and-a-half, seven firms sold $1.39B in local high-yield debt, up from zero from before that span of time. Outstanding Australian high-yield debt has multiplied in dollar amount 10 times to $20B. High-yield debt was only $2B in 2010.

A high-yield bond, by definition, carries a lower credit rating that investment-level corporate bonds, treasury bonds and municipal bonds. These bonds pay a higher yield because they carry a higher risk of default than other forms of bonds.

According to Augusto Medeiros, a credit analyst at Deutsche Bank, said, “This is the biggest development in the Australian fixed-income market and should broaden funding alternatives to borrowers.”

Mark Paton, CEO of FIIG Securities, said Australia has a sub-investment grade market valued at around $1B. FIIG has completed nine unrated transactions in the last two years, with yields from 6.5% to 9.5%. Paton added that FIIG has a (Australian) $60M payment-in-kind (PIK) issue with an all-up return of 18%.

PIK loans are loans that usually don’t provide any cash flow from borrower to lender between the drawdown date and the maturity or refinancing date, which makes it an expensive, high-risk loan. PIK notes aren’t popular in Australia but were prevalent in the U.S. and Europe before the global financial crisis. They’ve come full circle and are re-emerging globally.

 

Featured image via flickr/Corey Leopold

 

About Blaine Martin

I enjoy taking in the world around me and facing the challenge of conveying news and information that is clear, timely and professional. Please like and share our articles!

Have a tip we should know? tips@rhd.news

Uncategorized

Most Read

  1. News
    Pandora Papers Financial Leak Shows Us the Secrets of the World’s Rich and Powerful
    2 years ago
  2. Health
    US Supreme Court Rejects J & J TALC Cancer Case Appeal
    3 years ago
  3. Lifestyle
    9 Habits that Drain your Daily Focus and How to Avoid Them
    3 years ago
  4. BUSINESS
    Women’s Demand for Shapewear – the big Trends
    3 years ago
  5. BUSINESS
    Valentino Launches its Cosmetics Line
    3 years ago
  6. Health
    US Promises to Share 60 million Doses of AstraZeneca Vaccines
    3 years ago
  7. Health
    UK Offers Aid Amid Surging COVID-19 Cases in India
    3 years ago
  8. Sports
    Thousands of fans welcome Charlton funeral cortege at Old Trafford
    3 months ago
  9. News
    Brit left fighting for life after train derails in Argentinia
    3 months ago
  10. BUSINESS
    Dubai faces down airline rivals with $50 bln jet orders
    3 months ago
  11. Sunak
    UK’s Sunak brings back Cameron, sacks Braverman
    3 months ago
  12. Sports
    Man United’s Hojlund, Eriksen withdrawn from Denmark team duty
    3 months ago
  13. Health
    Autumn Sneezing Syndrome is on the rise… here’s what you can do
    3 months ago
  14. Canada
    Canada beat Italy to win Billie Jean King Cup for first time
    3 months ago

Follow @rushhourdaily: