Corporate bonds are a commoditised product: the modern world of fast investment decisions requires that. That is the theory – and high-yield bonds are, it is true, a recognisably standard product. Traditionally structured as junior debt, that is junior to any bank debt, high-yield bonds with their restricted enforcement rights and incurrence-only covenants fit into a recognisably standard form. However, there is real scope for negotiation and recent deals have shown that the market is a varied one where it pays to examine the detail.
Historically, going back to the early European high-yield bonds of the mid to late nineties, the bonds were structurally subordinated to any bank debt, and were issued by a finance vehicle within the issuer group which had assets comprising only equity or subordinated debt in another group holding company. The bank debt would be borrowed at a lower level in the group structure and...