Analysis Of The Bond Issued By Dynegy Inc.

3095 Words Nov 17th, 2014 13 Pages
This report is an analysis of a bond issued by Dynegy Inc. (DYN), an electric supply and sales company. DYN issued a 5.875% semi-annual coupon corporate bond on December 1, 2013 for face value of $10,000. The bond matures on June 1, 2023 with an initial call date on June 1, 2018 and a discounted call price of $9,455.00. Because this is a callable bond, we can expect a few possible yields from investing in this bond. The yield to maturity (YTM) was calculated to be 7.1367%. This will be the yield gained on the assumption that the bond is held to maturity from the settled date of October 23, 2014. The bond’s first yield to call (YTC) is the highest among the succeeding call dates and is calculated to be 8.369%. Despite being significantly higher than the YTM, DYN will not likely call the bond because the interest rate is expected to increase in the future; this means that DYN cannot refinance the debt with a lower rate. Even though the YTM is lower, we still found it to be relatively high after making a comparison with other bonds of similar characteristic. Continuing with the expectation of the bond not being called, we can expect the calculated duration of 6.66 years to hold true. This means that if an investment is made in this bond, you can expect to breakeven in year 6.66. This short period would be an attractive feature for an investor as the risk of loss is minimized time-wise.
With the note being a Senior Note Corporate Debenture, the holder of the…
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