Junk Bond (Noun)
Meaning
A (speculative) bond with a credit rating of BB or lower; issued for leveraged buyouts and other takeovers by companies with questionable credit.
Classification
Nouns denoting possession and transfer of possession.
Examples
- The company issued a junk bond to finance its acquisition of a smaller firm, despite concerns about its ability to repay the debt.
- Investors were wary of purchasing the junk bond due to the company's history of defaulting on its loans.
- The leveraged buyout was made possible by a large issue of junk bonds, which carried high yields but also higher risks.
- Analysts warned that the company's reliance on junk bonds to fund its expansion plans was unsustainable in the long term.
- The hedge fund specialized in trading junk bonds, often profiting from the high yields offered by these speculative securities.