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So, Junk Bonds are a specific thing in finance. Sharing a link[1] for those as financially ignorant as myself, before others think this title is brazen well-poi

So, Junk Bonds are a specific thing in finance. Sharing a link[1] for those as financially ignorant as myself, before others think this title is brazen well-poisoning. 1. https://en.wikipedia.org/wiki/High-yield_debt https://en.wikipedia.org/wiki/High-yield_debt

cimi_ 8y ago
I learned about junk bonds from Adam Curtis' series "The Mayfair Set"[1]. [1] https://www.imdb.com/title/tt0283201/ https://www.imdb.com/title/tt0283201/
asperous 8y ago
Interesting concept. I wonder if in the aftermarket these bonds will trade more like stocks due to the risk aspect changing over time (with the upper bound being the present value of the face value of the bond).
- soVeryTired 8y ago
  Yep, they do. Unsecured corporate debt is colloquially referred to as Credit in finance. Equity and low-grade credit tend to correlate quite well. In fact, this is one way that companies die in a recession: credit spreads blow up (i.e. risky debt is much more expensive than good debt). That makes it difficult for struggling companies to refinance maturing debt, and they go under. There's even a class of debt called CoCo bonds (contingent convertibles) that turn into equity if the company is struggling. The idea is to avoid the maturing debt scenario I described above. In practice, they're a horrible product for investors. Equity-like risk with bond-like returns.
josu 8y ago
From the article: >WeWork is issuing seven-year, senior unsecured bonds This means that in case of bankruptcy the holders of these bonds will probably be the last ones to get paid back, if they ever do. This increased risk is usually compensated by a higher yield than regular bonds. EDIT: As commenters point out, they wouldn't be the _last_: "In the event the issuer goes bankrupt, senior debt theoretically must be repaid before other creditors receive any payment." https://en.wikipedia.org/wiki/Senior_debt https://en.wikipedia.org/wiki/Senior_debt
- rahimnathwani 8y ago
  Why would they be the last? In the case of bankruptcy these will be paid back before any money goes to junior unsecured bonds (if any) and before shareholders.
  - soVeryTired 8y ago
    I'd imagine they have a lot of secured debt in the form of commercial mortgages. AFAIK they own some of their property rather than leasing it.
    - rahimnathwani 8y ago
      Probably. But the bond holders wouldn't be _last_ as the OP suggested.
armenarmen 8y ago
The polite term nowadays (at least according to a FA internship I had many moons ago) is High Yield Bond
- dopamean 8y ago
  I think it has always been a matter of who's talking and what do they think want you to think about the issuance. If it's your investment advisor and they want you to buy it's High Yield. If it's a reporter who thinks the company is acting irresponsibly it's junk.
draw_down 8y ago
> Sharing a link ... before others think this title is brazen well-poisoning. Yeah, HN does love a good bit of outrage about "title is clickbait!!!" Edit: Yep, two comments down someone is outraged about how the title is clickbait. Oh well.

cimi_ 8y ago

I learned about junk bonds from Adam Curtis' series "The Mayfair Set"[1]. [1] https://www.imdb.com/title/tt0283201/ https://www.imdb.com/title/tt0283201/

asperous 8y ago

Interesting concept. I wonder if in the aftermarket these bonds will trade more like stocks due to the risk aspect changing over time (with the upper bound being the present value of the face value of the bond).

soVeryTired 8y ago
Yep, they do. Unsecured corporate debt is colloquially referred to as Credit in finance. Equity and low-grade credit tend to correlate quite well. In fact, this is one way that companies die in a recession: credit spreads blow up (i.e. risky debt is much more expensive than good debt). That makes it difficult for struggling companies to refinance maturing debt, and they go under. There's even a class of debt called CoCo bonds (contingent convertibles) that turn into equity if the company is struggling. The idea is to avoid the maturing debt scenario I described above. In practice, they're a horrible product for investors. Equity-like risk with bond-like returns.

josu 8y ago

From the article: >WeWork is issuing seven-year, senior unsecured bonds This means that in case of bankruptcy the holders of these bonds will probably be the last ones to get paid back, if they ever do. This increased risk is usually compensated by a higher yield than regular bonds. EDIT: As commenters point out, they wouldn't be the _last_: "In the event the issuer goes bankrupt, senior debt theoretically must be repaid before other creditors receive any payment." https://en.wikipedia.org/wiki/Senior_debt https://en.wikipedia.org/wiki/Senior_debt

rahimnathwani 8y ago
Why would they be the last? In the case of bankruptcy these will be paid back before any money goes to junior unsecured bonds (if any) and before shareholders.
- soVeryTired 8y ago
  I'd imagine they have a lot of secured debt in the form of commercial mortgages. AFAIK they own some of their property rather than leasing it.
  - rahimnathwani 8y ago
    Probably. But the bond holders wouldn't be _last_ as the OP suggested.

armenarmen 8y ago

The polite term nowadays (at least according to a FA internship I had many moons ago) is High Yield Bond

dopamean 8y ago
I think it has always been a matter of who's talking and what do they think want you to think about the issuance. If it's your investment advisor and they want you to buy it's High Yield. If it's a reporter who thinks the company is acting irresponsibly it's junk.

draw_down 8y ago

> Sharing a link ... before others think this title is brazen well-poisoning. Yeah, HN does love a good bit of outrage about "title is clickbait!!!" Edit: Yep, two comments down someone is outraged about how the title is clickbait. Oh well.