Moody’s warns HY investors about pre-dating

By Rev Hui
16 Dec 2014

Asian bond investors have been warned to start paying attention to high yield bond covenants, as they may not be as strong as they first appear. Moody’s said issuers are increasingly giving themselves more flexibility to pay shareholders rather than bondholders.

The issue the rating agency has highlighted revolves around a company’s income basket — essentially money or assets that companies generate once a bond has been issued. In Asia the income basket usually equates to 50% of the issuer’s consolidated net income, plus any proceeds gained ...

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