It’s not that this phenomenon is brand new.
The tradition of reverse inquiries -- money managers encouraging issuers to to sell a certain type of bonds -- is decades old. It’s just that it’s taking off now.
And for the investment firms, there are more advantages than just obtaining hard-to-find securities. They’re privy to more information than their competitors and are able to dictate terms that are most beneficial to them.
Like when Franklin Resources Inc. and Capital Group Cos. orchestrated Fortescue’s offering of junk bonds in April. Not only did their involvement ensure that they received a hefty slice of the $2.3 billion of debt, which carries an interest rate of just under 10 percent, it also allowed them to secure a greater claim on the Australian miner’s assets, people with knowledge of the matter said at the time.
The bonds, meanwhile, have already generated a hefty profit. In the two months since the sale, their price has soared 8.9 percent.