Risks lurk in fine print of junk bonds

With low interest rates forcing bond investors to look for yield in riskier places, many investors are overlooking junk bond deals’ fine print

By Staff | January 7, 2015 | Last updated on January 7, 2015

1 min read

With low interest rates forcing bond investors to look for yield in riskier places, many investors are overlooking junk bond deals’ fine print, reports Forbes.

In the U.S., more than $475 billion in new high-yield bonds were sold last year.

Read: Why clients need to adjust return expectations

Attorney Adam Cohen, who founded research firm Covenant Review, says he’s seen complicated loopholes and clauses harmful to investors crop up in such offerings.

Investors tend to rely on creditworthiness, not on legal experts, to decide whether to invest. But the details of the contract matter too.

In at least one case, Cohen’s research has prompted an issuer to change the terms of a bond before issuing it, says Forbes.

Read more here.

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