Revenue Rise with Loans

I once worked with a telecommunications company whose mission included the goal “to maximize our stock portfolio.” The leadership decided this meant they should partner with a financial institution in order to manage their portfolio more efficiently. What they needed was a partner to help them—an investment bank—but what they did was acquire a bank [...]

A special situation occurs in the high-yield sector. The illiquidity in large parts of the universe causes price lags meaning that the aforementioned small changes in credit quality are not immediately reflected in bond prices. In the economic literature, this effect is known as non-trading. With respect to high-yield indices non-trading and non-synchronous trading of [...]

While the choice of the most appropriate measure of corporate leverage is an arbitrary task, empirical studies indicate that the financing gap is able  to explain a lot of the variance in credit spreads. It is defined as the difference between capital expenditures, including outlays for inventories, and the amount of cash that corporations need [...]

Having discussed some of the most influential economy-wide factors for the performance of corporate bonds, we will now examine specific indicators for the state of the US corporate sector. Traditional metrics of leverage focus on the debt-to-equity ratio. The rationale behind this is that a company’s assets are funded by a combination of debt and [...]