Editing High-yield debt (section)

=== Corporate debt ===
The original speculative grade bonds were bonds that once had been investment grade at time of issue, but where the credit rating of the issuer had slipped and the possibility of default increased significantly. These bonds are called "fallen angels".

The [[investment banker]] [[Michael Milken]] realized that fallen angels had regularly been valued less than what they were worth. His experience with speculative grade bonds started with his investment in these. In the mid-1980s, Milken and other investment bankers at [[Drexel Burnham Lambert]] created a new type of high-yield debt: bonds that were speculative grade from the start, and were used as a financing tool in [[leveraged buyout]]s (LBOs) and [[hostile takeover]]s.<ref name="thau2000" /><sup>:208</sup> In a LBO, an acquirer would issue speculative grade bonds to help pay for an acquisition and then use the target's [[cash flow]] to help pay the debt over time. Companies acquired in this manner were commonly saddled with very high debt loads, hampering their financial flexibility. Debt-to-equity ratios of at least 6 to 1 were common in such transactions. This led to controversy as to the economic and social consequences of transforming firms through the aggressive use of financial leverage.<ref>{{cite book |last1=Ross, Stephen A; Westerfield, Randolph W.; Jordan, Bradford D |title=Fundamentals of Corporate Finance |date=2010 |publisher=McGraw-Hill/Irwin |location=Boston |isbn=978-0-07-724612-9 |page=211 |edition=Ninth}}</ref>

In 2005, over 80% of the principal amount of high-yield debt issued by U.S. companies went toward corporate purposes rather than acquisitions or buyouts.<ref>{{cite news| url = http://www.jpost.com/Business/Commentary/Need-more-retirement-income-Look-at-high-yield-bonds |title= Need more retirement income? Look at high yield bonds |author=Aaron Katsman|newspaper=[[The Jerusalem Post]] |date = 6 June 2012}}</ref>

In emerging markets, such as China and Vietnam, bonds have become increasingly important as short term financing options, since access to traditional bank credits has always been proved to be limited, especially if borrowers are non-state corporates. The corporate bond market has been developing in line with the general trend of capital market, and equity market in particular.<ref>{{cite web |url=http://www.vietnamica.net/op/wp-content/uploads/2010/11/VuongTran.JEPR_.Vol6_.No1_.2011.pdf |title=Vietnam's corporate bond market, 1990–2010: Some reflections |publisher=The Journal of Economic Policy and Research, 6(1): 1–47 |date=15 March 2011 |access-date=27 November 2010 |archive-date=26 September 2020 |archive-url=https://web.archive.org/web/20200926105418/http://www.vietnamica.net/op/wp-content/uploads/2010/11/VuongTran.JEPR_.Vol6_.No1_.2011.pdf |url-status=usurped }}</ref>