Investment-grade corporates
Large, highly rated companies use the Eurobond market for regular funding, often under an EMTN programme. Their bonds are usually senior unsecured, with long maturities and relatively narrow spreads.
High-yield corporates
Companies rated below investment grade pay higher coupons and normally accept stricter terms: incurrence covenants that limit additional debt, payments to shareholders and asset sales; call schedules; and sometimes security over assets.
Ranking in the capital structure
| Ranking | Typical instruments |
|---|---|
| Secured | Secured notes, bank loans with collateral |
| Senior unsecured | Most corporate Eurobonds |
| Subordinated | Subordinated and hybrid bonds |
| Equity | Shares |
In an insolvency, higher-ranking claims are paid first. Structural subordination also matters: a bond issued by a holding company ranks behind the debts of the operating subsidiaries unless those subsidiaries guarantee it.
What drives value
- Leverage (debt relative to earnings) and interest cover.
- Cash flow stability and the business's competitive position.
- Refinancing needs and access to bank lines.
- Ownership and governance, and the company's financial policy.