Erhvervsobligationer: Et casestudie af a rsagerne til forskel i spreads

Tina Broe Bjerregaard Kristensen & Chris Reinecke-Wilkendorff

Student thesis: Master thesis


In recent years, an increasing number of Danish firms have used corporate bonds to raise capital. Previously, Danish corporations have relied almost exclusively on bank and mortgage loans for external financing, but due to tightened access to credit resulting from the global financial crisis the need for alternative ways to obtain the necessary funding has become more urgent. Therefore, the increased issuance of corporate bonds may only be the beginning of a long lasting change in funding patterns. The tendency gained momentum with the introduction of the First North Bond Market in 2012, which has also encouraged the first issuances in Danish crowns. When contemplating the various bonds issued by Danish corporations, a puzzling fact is the big differences in credit spreads even between firms of apparently same credit quality. This thesis investigates the reasons for such differences through case studies of specific bonds by Haldor Topsøe, TDC and Mærsk. The main focus is on the gap between the spreads of Haldor Topsøe’s and TDC’s bonds, which we will explain by analyzing their respective spreads relative to the spread of an index of BBB rated, benchmark sized bonds. We find that firms with the same credit rating may have different spreads solely due to the fact that they operate within different sectors. Therefore, credit ratings don’t adequately capture all industry specific aspects. Furthermore, new issuers pay a premium for their lack of history in the debt market. Similarly, new issues by well-known issuers will trade at higher spreads than previous issues within a limited time period, after the bonds have entered the second market. Firms without a rating will have to compensate investors for the inherent uncertainty about their true credit quality, entailing a higher spread for non-rated issues. We estimate the effect of getting an official rating by studying Mærsk, which announced that they had been rated late September 2013. Finally, premiums for the lack of liquidity can be substantial. Seeing that TDC is rated and it’s bond in question is a benchmark sized issuance from 2011, the only divergence from the BBB index is that caused by different sectors, which gives TDC a lower spread than the index. Haldor Topsøe’s spread, on the other hand, is not found to differ particularly from the index in terms of sector differences, but is affected by the three remaining factors. The biggest effect pertains to the bond’s lack of liquidity, followed by the company’s lack of an official rating. The fact that Haldor Topsøe is a new issuer exerts a more moderate influence on the size of the spread compared to the other factors, but is not to be considered trivial even though.

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
Publication date2013
Number of pages161