Types of high-yield bonds

Types of high-yield bonds

Investing in capital bonds has become common practice among investors in recent years. This is because they tend to fluctuate less than regular equities and allow a margin for profit through regular interest rate payments. Moreover, bonds are also preferred among entrepreneurs, since they do not give up the same degree of control to the company in which they are investing as shares do.

Investors who are interested to undertake any type of debt financing such as notes, capital bonds and debentures would be well advised to get in touch with a mediating company, such as Amyma, in order to be introduced to the best opportunities possible. Below are some of the types of high-yield corporate bonds in the UK bond market and how they work:

Start-up companies

Start-up companies (also known as ‘rising stars’) are promising companies that have not yet received the capital strength needed for an investment-rate grading. The bond market is an easy way for these companies to gain capital and grow. As risky as this may sound for prospective investors, considering the lack of a track record and experience, historically start-up companies tend to grow to become larger companies with top credit records.

’Fallen angels’

Companies experiencing financial hardship can also issue capital bonds, usually in an attempt to save the company. These bonds are not necessarily riskier than other types of bonds, because if the company ratings improve, then the possibility of profit can improve as well. If the ratings do not improve or remain low, then capital investment should still be returned intact to the investor so long as the company does not become bankrupt before the redemption date.

Capital-intensive bonds

Capital-intensive bonds are issued by corporations with high credit ratings that are unable to finance all their capital needs. For instance, tech companies are in need of large amounts of capital in order to upgrade their equipment and this cannot always be acquired through banks of other types of loans.

LBOs

Leveraged buy outs are high-yield capital bonds that, when combined, create a special type of company that can buy out a public company from its current shareholders. Usually, LBOs target high-debt public companies.