A Pragmatist’s Guide to Leveraged Finance: Credit Analysis for Bonds and Bank Debt

18. Making Money or Losing It Off of News Events

What’s in this chapter:

• The process for analyzing typical credit events

• How to examine covenants and structures to analyze how events might impact bond and loan prices

• Two acquisitions scenarios

• An IPO scenario

• A refinancing scenario

As pointed out in earlier chapters, the leveraged finance market is more prone to and reactive to events than most other fixed-income markets.

Unfortunately, no set of rules governs how a company’s debt securities will react in response to a certain type of news event. Often the entire market may view an announced event as positive (or negative). But investors may have significantly different views on how much the news should impact security prices, and different ...