Today, Bond Capital presents its research on high yield bond rates in comparison to the cost of mid-market Canadian Bank debt. In order to achieve the magnitude of leverage offered by the high yield bond market, Canadian senior bank debt is complemented with mezzanine capital for this comparison of finance options in the Canadian mid-market. US high yield bond rates were at 15 year lows in January 2014. Over the last 4 years, high yield rates range between 5.9% and 7.5% as shown in Chart 1 below. Bond Capital transactions are shown in Chart 2 wherein the cost of debt ranges between 4.2% and 6.9%. The Bond Capital transactions were between $100 and $250 million in enterprise value. The threshold for high yield bond issuance is estimated at greater than $200 million in enterprise value. The result illustrates that the Canadian mid-market bank debt markets are highly competitive with publicly traded high yield notes.
Further differences between high yield bonds and a made-in-Canada banking deal are summarized in the table below: