Do bond holders do a better job than equity holders when doing their homework on a company? I mean, bond holders have the same objectives, maximum reward at the lowest possible risk. Of course that is how some banks in the US got into trouble during the last downturn as their triple A rated Mortgage Backed Security turned out to be nothing more than a collective bunch of wooden houses in swamps owned by people in string vests. No, that is not a fair reflection of what happened, but you get the picture, an uninformed investor and someone who fails to do their homework is dangerous. And I guess as a bond investor you could have placed a lot of faith and substance in the rating agencies research, but could have been really wrong. Everyone was to blame in that mess, it was far easier to point at banker though.
But, closer to home, and where this is going is that I saw this release: African Bank raises R2 billion from domestic bond issue. And the appetite was such that the ABIL treasury saw the issuance oversubscribed. At tighter spreads than before. SO, whilst the perception out there exists that the lenders of unsecured credit are creaking, the bond holders, the funders of the business are queuing up, check it out!! Right, we will continue to hold the company and buy on what looks like a really good price.