BIS Sounds Alarm Over Record Sales of Payment-in-Kind Junk Bonds
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Record sales of high-yield payment-in-kind bonds are triggering uneasiness among international regulators concerned that investors may suffer losses when central banks tighten monetary policy.
Issuance of the notes, which give borrowers the option to repay interest with more debt, more than doubled this year to $16.5 billion from $6.5 billion in 2012, according to data compiled by Bloomberg. About 30 percent of issuers before the 2008 financial crisis have since defaulted, the Bank for International Settlements said in its quarterly review.