junk bond
High-yield liability
A junk bond is a high-yield corporate bond rated below investment grade by credit agencies, meaning it carries a significantly higher risk of default than bonds from more stable companies.
Investors accept this risk in exchange for higher interest payments.
Junk bonds became notorious in the 1980s when they were used heavily to finance leveraged buyouts and corporate takeovers.
The company financed its expansion through junk bonds.
The term is sometimes used figuratively for any risky financial instrument.
Preset standard option
- bankruptcyLegal status when insolvent
- distressedSuffering emotional turmoil
- insolvencyInability to pay debts
- downgradeReduce in status
fallen angel · credit risk · overleveraged · precarious · volatile · uncertain · collapse · restructuring
Debt-funded corporate acquisition
- LBODebt-funded acquisition
- acquisitionAct of obtaining something
- takeoverAssuming command of something
- private equityCapital for unlisted companies
corporate raider · hostile takeover · recapitalization · 1980s · balance sheet · debt financing
Abundant output ratio
- spreadTo distribute widely
- risk premiumExtra yield for uncertainty
- returnGo back again
- interest rateCost of borrowing money
income · payout · basis points · compensation · reward · yield curve · fixed income
Loans owed by companies
- debentureUnsecured debt instrument
- unsecuredNot backed by collateral
- subordinatedPlaced below in rank
- leveragedEmployed for advantage
obligation · liability · principal · interest · maturity · coupon · bondholder · issuer
Exchange for existing securities
- liquidityConvertibility to cash
- institutional investorsOrganizations investing pooled funds
- hedge fundPrivate investment partnership
- mutual fundPooled, managed investment vehicle
portfolio · valuation · price volatility · market maker · over-the-counter · ETF · arbitrage
default
Preset standard option
- bankruptcyLegal status when insolvent
- distressedSuffering emotional turmoil
- insolvencyInability to pay debts
downgrade · fallen angel · credit risk · overleveraged · precarious · volatile · uncertain · collapse · restructuring · creditworthiness
leveraged buyout
Debt-funded corporate acquisition
- LBODebt-funded acquisition
- acquisitionAct of obtaining something
- takeoverAssuming command of something
private equity · corporate raider · hostile takeover · recapitalization · 1980s · balance sheet · debt financing
high yield
Abundant output ratio
- spreadTo distribute widely
- risk premiumExtra yield for uncertainty
- returnGo back again
interest rate · income · payout · basis points · compensation · reward · yield curve · fixed income
corporate debt
Loans owed by companies
- debentureUnsecured debt instrument
- unsecuredNot backed by collateral
- subordinatedPlaced below in rank
leveraged · obligation · liability · principal · interest · maturity · coupon · bondholder · issuer · creditor
secondary market
Exchange for existing securities
- liquidityConvertibility to cash
- institutional investorsOrganizations investing pooled funds
- hedge fundPrivate investment partnership
mutual fund · portfolio · valuation · price volatility · market maker · over-the-counter · ETF · arbitrage
- bond typesdebenture
- financial termswealth, asset, currency, balance sheet, audit
- bondsdebentures, gilts, eurobonds, bondholder, bondholders
- financial instrumentspromissory notes, check, cheque, checks, bank drafts
- trading slangbull, short, long, dip, pump
- yield producersdividend stock, preferred stock, savings account, money market