Previous

Page - 4

Moreover, junk bonds tend to be shorter in duration than investment-grade bonds. When junk bonds are used to finance a leveraged buyout, it is typically assumed that such financing will be needed for only five to ten years.

Thus, junk bonds have also been used as a financing mechanism in mergers and acquisitions. In a LBO, an acquirer would issue junk bonds to help pay for an acquisition and then use the target's cash flow to help pay amortize the debt over time.

Before analyzing the junk bonds, lets have a look at existing debt market in India.

Pest Analysis - Indian Debt Market

Next

* Contributed by -
Ankit Chetan & Sudhanshu Duggal,
National Institute of Industrial Engineering (NITIE),
Mumbai.