The role of covenants in bond issue. The case of Russian companies

Bazzana, Flavio; Zadorozhnaya, Anna; Gabriele, Roberto

doi:10.1016/j.ememar.2018.03.003

Cited by 7 publications

(2 citation statements)

References 51 publications

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“…Ratha, De, and Kurlat (2018) document that governing law has a reliable power to explain bond spread differences among emerging countries. Bazzana, Zadorozhnaya, and Gabriele (2018) finds that Russian bondholders use covenant protection to compensate for different creditor protections when the firm has Eurobonds in its debt portfolio. Our work extends this line of research by investigating corporate bond pricing from the default risk and liquidity perspective.…”

Section: Related Literaturementioning

confidence: 99%

Liquidity risk and corporate bond yield spread: Evidence from China

Chen

Jiang

2020

Int Rev Finance

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This paper investigates the contribution of liquidity risk to Chinese corporate bond spreads. We calculate corporate bond spreads based on the full treasury yield curve and establish a set of liquidity measures of the Chinese corporate bonds. Our empirical study shows that liquidity premium accounts for a relatively smaller portion of corporate bond spread in China, although the market liquidity is low and corporate bond issuers are strictly pre-screened. These findings are interesting, as the developed markets have better liquidity and less pre-issuance restriction, and liquidity premium still explains a relatively larger portion of corporate bond spread. Besides, we also explore the determinants of Chinese corporate bond liquidity and default premiums.

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Section: Related Literaturementioning

confidence: 99%

Liquidity risk and corporate bond yield spread: Evidence from China

Chen

Jiang

2020

Int Rev Finance

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“…Fan et al (2012) found that a country's legal and tax system, corruption, and the preferences of capital suppliers explained a significant portion of the variation in leverage and debt maturity ratios. Bazzana et al (2018) found that while placing bonds simultaneously in the domestic and Eurobond markets, the companies in Russia faced a higher level of covenant protection for the issues placed in the domestic market to compensate for the different levels of creditor protection. Petrasek (2010) accented that global bonds intended for multimarket trading, were offered concurrently in two major markets, for example, the US bond market and Eurobond market, as well as the trading, clearing and settlement could be conducted between the markets.…”

Section: Introductionmentioning

confidence: 99%

Analysis of the Legal and Regulatory Situation of Uncovered Corporate Bond Issuance in the Baltic States: is there a Common Framework Possible?

Tocelovska

Eglite

2021

EIS

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While the development of the Baltic corporate bond market is based on the uncovered bond segment, the elaboration of the legislative base has a devoted emphasis on the covered bonds. The shift from a country-focused to the pan-Baltic-focused capital market has been publicly acknowledged by the governments (Ministry of Finance of the Republic of Latvia, 2018) and is in line with the ongoing Capital Markets Union initiative of the European Commission (The High Level Forum on the Capital Markets, 2020). Moreover, a pan-Baltic covered bond legal and regulatory framework has been initiated (Ministry of Finance of the Republic of Lithuania, 2019). The strong demand for the corporate bond segment in the Baltics (the average number of issues listed in the period 2009-2019 reached 44) where no covered bonds are traded on Nasdaq Baltic (Nasdaq Baltic, 2020) creates the need for a unification of the uncovered corporate bond legislation. The existing academic research is relatively modest on analysing legal frameworks of corporate bond issuance. The studies examine the division between domestic and international (typically Eurobonds) legal issuance frameworks with more focus on the legislative frameworks as related to the terms of issuance. Few articles consider a new supranational bond issuance framework, while the interpretation of the issue is radically diverse. There is no existing academic research on the legal framework of the uncovered corporate bond issuance in the Baltics. The aim of this research is to reveal the feasibility of the development of a pan-Baltic uncovered corporate bond issuance framework by analysing the existing legal and regulatory documentation of the corporate bond issuance in the Baltic states. The research provides a limitation for the corporate bond issuance process legislation in the form of information disclosure requirements and the prospective situation of a default of an issuer. The research presents the primary data analysis of the in-depth interviews with pan-Baltic legal professionals in the corporate bond issuance segment conducted in the period December 2019-March 2020. The research demonstrates that the concern of the information disclosure for the issue of corporate bonds is covered under the new regime of the Prospectus Regulation, where further harmonisation of the smaller scope of issues is needed. The national insolvency laws in the Baltics are yet different and need to be harmonised for the default of the issuer. In the result of the research, the idea of a proposal for a pan-Baltic legal and regulatory framework for uncovered corporate bond issuance is evaluated as feasible action corresponding both to the goals of the Capital Markets Union and a pan-Baltic capital market development. The research methods used in this article are scientific publication analysis, document analysis, and in-depth interviews.

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Pricing convertible bonds

Batten

Khaw

Young

2018

Journal of Banking & Finance

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Convertible bonds are a developing segment of the corporate bond market.Nonetheless, the pricing of convertible bonds has not been addressed extensively due to the complicated optionality and the links between valuation and the underlying risk factors.Mixed results of mispricing have been reported. Our study clarifies this by a unique sample that consists of pure convertible bonds to control for complex optionality in these securities such as the call option. We examine the pricing of the real-time trade prices of the US convertible bonds. Least squares Monte Carlo simulation approach is used to solve a pricing model that includes stochastic volatility and credit risk. On average, an underpricing of 6.31% is observed from daily data covering from October 26, 2004 to June 30, 2011.Stochastic volatility is found to significantly affect the convertible bond pricing. Furthermore, illiquidity is an important explanatory variable that explain the mispricing of convertible bonds.

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The role of covenants in bond issue. The case of Russian companies

Cited by 7 publications

References 51 publications

Liquidity risk and corporate bond yield spread: Evidence from China

Liquidity risk and corporate bond yield spread: Evidence from China

Analysis of the Legal and Regulatory Situation of Uncovered Corporate Bond Issuance in the Baltic States: is there a Common Framework Possible?

Pricing convertible bonds

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