Syndicate 1

Question3
Reference is also made to "companies like Nufarm, Ausdrill and this year, Nine Network, accessing the high yield bond and loan markets for the first time.

1). Explain the characteristics of the high yield market

The high yield market consists of debt securities which is rated below investment grade, which means they have greater default risk, therefore those securities need to offer yields that can compensate investors for tolerating the risk.

High-yield bonds are usually listed on a stock exchange. This is for the tax purpose rather than to enhance liquidity and it is atypical for the listing to be on the issuer’s home stock exchange. The high-yield bond is usually offered to investors which consists of large amount of institutional investors, including hedge funds, high-yield funds, corporate funds, insurance companies and pension funds. Once they are issued they are generally actively traded in the secondary market. A significant proportion of investor demand can be expected to come from the US high-yield investor community.
High-yield bonds are not secured by security interests over real property of the issuer and they are benefit from guarantees from other entities within the corporate group in support of the credit. There is a trend of high-yield bonds to be fully secured. This appears to be developing for the most part in the context of refinancing transactions where bonds are issued in order to refinance existing bank debt in full or in part.
Source:
(June 2011, Accessing the debt capital markets-High-yield bonds http://www.nortonrosefulbright.com/knowledge/publications/51946/accessing-the-debt-capital-markets-high-yield-bonds)
2).Suggest why that market is attractive to the nominated companies.
High-debt companies leveraged with above-average debt loads that may cause concern among rating agencies. Many mining services companies such as Ausdrill have been