I Need Help With Research For Corporate Bonds- 10k Report Review.

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Discussion Week 3

COLLAPSE

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Corporate bonds is one category of debt issued by a company and sold to investors. The investors are basically lenders to the company – bonds are contractual debt.  With bonds, the company gets capital to buy additional assets and in return the bond holder is paid interest payments at either a fixed or variable interest rate. When the bond expires, or “reaches maturity,” the payments cease, and the original investment is returned. For your company, review the 10-K report and analyze their bond issuances.

Discussion questions

  1. How much does your company have in bonds issued? What types of bonds do have they issued? When are some of the amounts due to reach maturity?
  2. What is the rating of their most recent bonds?
  3. If interest rates are rising, how does this impact the yield of the current bond holders

 

 

 

 

Peer Responses: Can be 150 words min. Professor cares about quality over quantity.

  • FIRST PEER POST ( I NEED TO WRITE A RESPONSE FOR THIS)

 

 

 

 

 

 

 

 

 

 

Example for responses to this post ( from others who already commented)

 

1)
Thank you for the post Jane. Its so interesting to read the bond issuance for the work needed at the airport. Never truly understanding how bonds issued by corporations worked, it was eye opening to see that these bonds offset future expenses. I’m so used to budgeting and forecasting working for a small private company, I never knew this was a thing. 

Could you tell me what the $750M is for in 2022? Was that for the JFK buildup or was that buildup funded by the first issuance of the 2020 and 2018 bonds? 

I agree with you on the predictability of the market however I am hoping that Delta and another airlines are going to see a return to normalcy. With this normalcy, I’m interested to see the total bond issuance compared to prior issuance. With revenues and profits increasing as more and more people are flying, I wonder what future bond issuance will be like if any is needed at all. I’m going to dive into my own research and see what prior bonds issued were just because I’m curious to see what Delta has issued prior to 2018.

Thanks for making the noggin get to thinking. I look forward to next weeks post.  

 

2– Great job, Jane! 

I was eager to read your post when I saw that your company was Delta airlines to see how the pandemic has affected their bonds and the bond rating. I wonder if the lack of travel throughout 2020 and 2021 has relation to do with their BB rating and them being labeled as high-yield. Something else I noticed was that compared to my company (Target) the interest rate on these bonds is significantly higher, I wonder why that is? I know the airline industry was hit hard during COVID and they have a ton of making up to do financially so I wonder if that plays a role. I am interested to see how this unfolds. 

Looking forward to next week’s post! 

Thanks, 

 

 

 

Bottom of Form

SECOND PEER RESPONSE POST

 

 

    TARGET

2- 1. How much does your company have in bonds issued? What types of bonds do have they issued? When are some of the amounts due to reach maturity?

Target has issued two blocks of bonds:

  1. $1.5 billion in notes paying a 2.5% interest rate, due in 2025
  2. $1 billion in notes with an interest rate of 2.65% due in 2030

These are commercial/corporate bonds.” Investors who buy corporate bonds are lending money to the company issuing the bond. In return, the company makes a legal commitment to pay interest on the principal and, in most cases, to return the principal when the bond comes due, or matures.” – SEC

Reference: https://markets.businessinsider.com/bonds/target_corpdl-notes_201616-26-bond-2026-us87612ebe59

https://www.sec.gov/files/ib_corporatebonds.pdf

  1. What is the rating of their most recent bonds?

Moody’s has rated Target’s most recent bond at a level of A2. A2 is the sixth highest rating in Moody’s Long-term Corporate Obligation Rating. Obligations rated A2 are considered upper-medium grade and are subject to low credit risk. This means that prospect looks statble. The proceeds of the new debt can be used to refinance their existing debt and be used for various corporate financial purposes.

Reference: https://news.yahoo.com/target-corporation-moodys-assigns-a2-160906891.html

https://www.moodys.com/credit-ratings/Target-Corporation-credit-rating-223000

  1. If interest rates are rising, how does this impact the yield of the current bond holders?

When interest rates rise, the price of an exisiting bond will fall and yields will go up. On the other hand, when interest rates fall, the price of the bond will rise and yields will go down. The coupon will remain constant. Typically, most bonds will pay an interest rate that improves if the interest rate falls and the demand rises.

Reference: https://www.investopedia.com/ask/answers/why-interest-rates-have-inverse-relationship-bond-prices/#:~:text=Key%20Takeaways,a%20decline%20in%20its%20price.

 

 

Example of peer response from other student

 

Hello Emma,

I looked into Fitch, and they give Target an ‘A’ rating too. They have an interesting take on how the Covid has helped retailers. I knew Amazon was a central receiver of that experience.

According to Fitch, the pandemic benefitted many retail categories. The pandemic was a primary driver for changing consumer behavior, such as more time spent at home, discretionary budget savings from reduced spending on services like travel, and stimulus payments which mitigated unemployment spikes. General merchant superstores are seeing additional benefits from shopping trip consolidation like Target’s omnichannel capabilities, including in-store and curbside pickup of online orders.

Great post! It made me read more into Target.

Cheers!