In this article, we’ll review the senior secured notes due 2026 of Abcor Finance.
Abcor Finance is a trade finance provider with a focus on commercial clients in industries like packaging, electrical goods, and pharmaceuticals.
The firm is steered by Colm O’Reilly and Andy Beck, who together have more than 35 years of expertise assisting business growth through the use of purchase order/trade finance. They had founded a company that provided purchase orders and trade finance in the past, and they offloaded it to a global credit fund in the US.
Abcor Finance has offices in the UK and Ireland.
If you have been proposed this option and want a second opinion, you can email me (advice@adamfayed.com) or contact me here.
We can sometimes offer discounts, and other benefits, if you want to invest in it, compared to many other providers, or introduce alternatives which might be better for your situation.
The information in this article is for general guidance only. It does not constitute financial, legal, or tax advice, and is not a recommendation or solicitation to invest. Some facts may have changed since the time of writing.
Abcor Finance: What is Trade Finance?
Trade finance refers to the financial instruments, products, and services that are used to facilitate international trade transactions. The aim of trade finance is to provide financing and risk mitigation solutions to buyers and sellers involved in cross-border transactions.
It provides various benefits to buyers and sellers, including reduced payment risks, improved cash flow, and access to financing solutions that might not otherwise be available.
Abcor Finance 7.5% Senior Secured Notes due 2026
What is a senior note?
A senior note, also known as a senior debt or senior bond, is a type of bond that has priority over other types of debt in the event of default or bankruptcy.
When a company issues bonds, it may do so in different classes or tiers of debt, with different levels of priority. Senior notes are typically the highest-ranking debt in terms of priority, which means that in the event of default or bankruptcy, they are paid back before other types of debt.
What are the terms of Abcor Finance senior secured notes?
Abcor Finance established CCAP DAC, a special purpose vehicle, to issue its asset-backed senior secured notes due 2026 in US dollars (USD).
The notes have a term of five years and bear a fixed coupon of 7.25% per annum. This interest is paid out on a semi-annual basis.
Thanks to the proceeds of the notes, Abcor Finance is able to expand its trade finance funding activities into the commercial sector and meet growing business demand.
The notes are Listed on Vienna and Frankfurt, and are Rated–Baa1.
How Bonds Are Rated
Bonds are rated based on their creditworthiness, or the ability of the issuer to repay its debt obligations. The rating is assigned by credit rating agencies, such as Standard & Poor’s, Moody’s, or Fitch Ratings, which analyze the financial health of the issuer and assign a rating based on their assessment.
The rating agencies use a system of letters, numbers, and symbols to indicate the creditworthiness of the bond issuer. For example, Standard & Poor’s uses a rating scale that ranges from AAA (the highest rating) to D (the lowest rating). Moody’s uses a similar scale, ranging from Aaa to C, while Fitch Ratings uses a scale that varies from AAA to BBB for investment-grade bonds and BB to D for non-investment grade bonds, also known as junk bonds.
Baa1 is a credit rating assigned by Moody’s to a bond or other fixed-income security. A Baa1 rating is considered to be an investment-grade rating, which means that the issuer has an adequate ability to meet its financial obligations, although it may be more susceptible to adverse economic conditions than issuers with higher credit ratings.
More specifically, a Baa1 rating from Moody’s indicates that the issuer has a moderate credit risk, with some speculative elements, and is subject to moderate credit risk, according to Nasdaq.
How would an investor’s return on investment look like?
If you invest a hundred thousand USD in Abcor Finance senior secured notes due 2026, you’ll potentially get a payout of 3,625 USD twice a year.
How can investors access Abcor Finance’s senior secured notes?
Investors can subscribe in the offering through portfolio bonds, investment platforms, and directly via major stockbrokers and private banks.
What are the advantages and disadvantages of this type of investment?
Benefits
Solid Returns in a Low-interest Environment
When interests are low, senior secured notes like what’s being offered by Abcor Finance can offer strong yields and they generate stable income with a relatively low level of risk.
Security
In terms of security, these asset-backed notes provide some cushion should the company collapse and fail to repay the bonds. The underlying assets serve as collateral if such an event occurs.
Diversification
Investing in these senior secured notes can provide diversification benefits for investors, as the trade finance sector is generally less correlated with other segments of the fixed-income market. This can help to reduce overall portfolio risk and increase the potential for long-term returns.
Exposure
Investing in senior secured notes in the trade finance sector which is Abcor Finance’s focus can provide exposure to the global trade market, which in turn can be a significant driver of economic growth and development around the world.
Risks
Liquidity
On the other hand, senior secured notes issued in the trade finance sector can be less liquid than other types of bonds, as this market is typically less active and has fewer issuers than other segments of the bond market.
Credit Risk
There is always the possibility that the issuer of the bond may default on its payments, though I already said earlier that senior notes have priority in terms of repayment, which therefore makes it less likely for them to default.
Interest Rate
Changes in interest rates can affect the value of the bond. If interest rates rise, the value of the bond may decrease, and vice versa.
Inflation
Inflation can erode the purchasing power of the interest payments and principal that the bond provides.
Final Thoughts
The trade finance market is typically characterized by longer investment horizons and lower trading volumes, which can make it more difficult for investors to buy or sell senior secured notes in this sector. Additionally, the market can be subject to greater volatility and risks associated with changes in international trade policies or economic conditions.
That being said, senior secured notes issued in the trade finance sector can still be a valuable component of a diversified investment portfolio for investors seeking exposure to this market, particularly in a low-interest environment.
As with any investment, investors should carefully evaluate the creditworthiness of the issuer and the risks associated with investing in this sector before making an investment in Abcor Finance senior secured notes due 2026. Moreover, investors should carefully consider their investment objectives, risk tolerance, and overall financial situation before investing in these notes or any other type of bond.
See how Abcor compares to the RL360 Oracle Offshore Bond.
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