Young Research & Publishing Inc.

Investment Research Since 1978

Disclosure

  • About Us
    • Contributors
    • Archives
    • Dick Young’s Safe America
    • The Final Richard C. Young’s Intelligence Report
    • You’ve Read The Last Issue of Intelligence Report, Now What?
    • Dick Young’s Research Key: Anecdotal Evidence Gathering
    • Crisis at Vanguard
  • Investment Analysis
    • Bonds
    • Currencies and Gold
    • Dividend Investing
    • ETFs & Funds
    • Investment Strategy
    • Retirement Investing
    • Stocks
    • The Efficient Frontier
  • Investment Counsel
  • Dynamic Maximizers®
  • Retirement Compounders®
  • Free Email Signup

Didn’t This Happen Before the Last Crisis?

August 30, 2019 By Jeremy Jones, CFA

By OpturaDesign @ Shutterstock.com

Companies from a wide array of industries are securitizing their assets. Essentially the companies are mortgaging themselves to achieve investment-grade debt ratings. This is reminiscent of similar behavior just before the Great Recession. Claire Boston reports for Bloomberg:

As borrowing costs plunge for the highest-quality companies, there’s a growing incentive for riskier businesses like fast-food chains to mortgage virtually all their assets.

Franchised companies like burger restaurant Jack in the Box Inc. and massage provider Massage Envy are increasingly selling unusual bonds backed by most of their business. By pledging key assets like royalties, fees, and intellectual property to bondholders, companies can win investment-grade credit ratings on their debt and slash their financing costs, making their bonds higher quality even if their overall companies are still relatively risky.

This year borrowers have sold more than $6.9 billion of these securities, known as whole-business securitizations, approaching the most on record, according to data compiled by Bloomberg. Fast-food restaurants used to be the main issuers of this debt, but a wider array of companies are jumping in. This year, in addition to Massage Envy, a group of preschools and a distributor of music royalties have sold the bonds.

“The sector is growing very fast,” said Tracy Chen, who invests in whole-business bonds as head of structured products at $75 billion asset manager Brandywine Global. “You can almost securitize anything.”

Companies are being nudged toward this kind of financing by bond investors that are gravitating toward relatively safe securities and away from the riskiest debt in the junk-bond market. They’re looking for an elusive combination of safety and strong returns in a world that has more than $16 trillion of negative-yielding debt. That’s translating to material savings for corporations that can shift from high-yield borrowings to investment grade.

Read more here.

Share this:

  • Email
  • Twitter
  • Facebook

You Might Also Like:

  • Post-Financial Crisis Regulation Could Worsen the Next Crisis
  • Is the Boom in Global Auto Debt a Looming Crisis?
  • Bonds Break Through 3%
  • Author
  • Recent Posts
Jeremy Jones, CFA
Jeremy Jones, CFA, CFP® is the Director of Research at Young Research & Publishing Inc., and the Chief Investment Officer at Richard C. Young & Co., Ltd. Richard C. Young & Co., Ltd. was ranked #5 in CNBC's 2021 Financial Advisor Top 100. Jeremy is also a contributing editor of youngresearch.com.
Latest posts by Jeremy Jones, CFA (see all)
  • Now You Can Own Your Vacation and It Doesn’t Have to Be a Time Share - May 24, 2022
  • Big Banks Adopting Blockchain for Short-Term Trading - May 23, 2022
  • BULLWHIPPED? Inventory Overhang Could Slow Growth in Certain Sectors - May 20, 2022

Search Young Research

Most Popular

  • MARKET CHAOS: This May Take Time, Here’s How to Prepare
  • Your Survival Guy: “Sell in May, Buy After Labor Day?”
  • PRICES SOAR: Diesel Shortage Could Cripple America's Economy
  • The Power of a Compound Interest Table
  • All-Powerful Money Managers Voting YOUR Money Targeted by Senate GOP
  • Institutional Investors Fall in Love with Oil, Again
  • Vanguard Wellesley (VWINX) vs. Wellington (VWELX): Which Fund is Best?
  • MARKET TURNING: Canada's Housing Market Turmoil
  • COMMODITY CRUNCH: Will Tesla Buy a Cobalt Mine?
  • HORDING CASH: Funds Hold the Highest Level of Cash Since 9/11

Don’t Miss

Default Risk Among the Many Concerns with Annuities

Risk and Reward: An Efficient Frontier

How to be a Billionaire: Proven Strategies from the Titans of Wealth

Could this Be the Vanguard GNMA Winning Edge?

Cryptocosm and Life After Google

Warning: Avoid Mutual Fund Year End Distributions

Is Gold a Good Long-term Investment?

How to Invest in Gold

Vanguard Wellington (VWELX): The Original Balanced Fund

What is the Best Gold ETF for Investing and Trading?

Procter & Gamble (PG) Stock: The Only True Dividend King

The Dividend King of the North

You’ll Love This if You’re Dreaming of an Active Retirement Life

RSS The Latest at Richardcyoung.com

  • Harvard Professor Calls Homeschooling a “Threat to Society”
  • Biden IGNORES Americans’ Pain at the Pump, Touts “Green Transition”
  • The Virtue of Trump Supporters vs. Antifa and ESG Investing is Like This…
  • Why Does Joe Biden Put Americans Last?
  • PRIMARIES: Watch GOP Voter Turnout Tonight
  • The Supreme Court Must Always Protect the Constitution
  • Our Daily Bread Threatened?
  • Watch Out for Your Worst Enemy
  • Farmer Tells Steve Bannon Biden’s Inflation Is Ruining His Business
  • PARTY’S OVER JOE: Republicans Crush Democrats in Local Elections

About Us

  • About Young Research
  • Archives
  • Contributors

Our Partners

  • Richard C. Young & Co.
  • Richardcyoung.com

Copyright © 2022 | Terms & Conditions

 

Loading Comments...
 

    loading Cancel
    Post was not sent - check your email addresses!
    Email check failed, please try again
    Sorry, your blog cannot share posts by email.