Describe the difference between a bond issued as a high-yield bond and one that has become a “fallen angel.”

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Describe the difference between a bond issued as a high-yield bond and one that has become a “fallen angel.”

 

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Both of these bonds would be rated as BB or below.  The company referred to as a fallen angel would be a firm that was a successful, financially stable firm that has recently struggled.  Many of the bondholders had purchased the bond when it was rated much better.  The other company issued bonds when it was already in a less financially stable condition.  The purchasers of these bonds bought the bonds while they were rated as a junk bond.

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