written by reader High Yield Bonds

By anton669, November 19, 2015

Hi Travis,
I see companies like Consol Energy (CNX), that have a bond with a coupon 8,25%, Maturity 2020, and trades about 84 USD. I feel that is a excellent deal, but i dont know the real risks involved.
I know the energy sector is in real pain and short term i don t see a real recovery. However, CNX it´s a good company and i dont see any chance of bankrupt soon. Famous investor David Einhorn bouhght the stock recently. Can y explain me the risks envolved and how it works. For example can they cancel the coupon without deffault? What means unsecured bond? How i see if is senior?
Can anybody explain ?
Regards,
Antonio Tavares

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anton669Travis Johnson, Stock Gumshoe Recent comment authors

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Travis Johnson, Stock Gumshoe
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Good questions! I haven’t invested in bonds recently, but I can give you my quick response that may not be as detailed as you’d like. Yes, the real risk is that Consol will default on the bond and/or go bankrupt. I haven’t looked at their bonds, but typically they cannot alter the coupon payment or cancel or delay it without defaulting or entering into a restructuring agreement with bondholders, either voluntarily or through the courts. Bankruptcy doesn’t mean they go out of business necessarily, it just means they can’t pay their debts — so even if the company is fundamentally… Read More »

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