The Name’s Bond: How to Choose Bonds Wisely

We’re launching a new series about bonds in our portfolio — “The Name’s Bond”. Every week, we’ll talk about different bonds in our portfolio and explain why we chose them.

But what is the bond? Bonds are debt instruments issued by a company to raise capital. Bonds offer investors the opportunity to become creditors to a company, government, or municipality and to earn stable income while balancing risk and return.

As creditors, bondholders receive coupon interest payments on scheduled dates until the bond’s maturity, when the bond’s face value is returned.

Bonds are generally considered a less risky financial instrument compared to structured notes and stocks, though they are not without risks—such as issuer bankruptcy. Therefore, it’s important to choose bonds carefully.

In this publication we’ll talk about senior bonds in our portfolio.

What is a Senior Bond?

Senior bond is another characteristic of a bond that provides additional protection for the investor. It represents the issuer's debt obligation to the investor: in the event of bankruptcy, the indebted company repays investors according to priority. Claims of senior bondholders are settled before payments are made to holders of subordinated bonds and shares.

One of the senior bonds in our portfolio is in the utilities sector.

Issuer: Enel Generacion Chile

A subsidiary of Enel Chile S.A., focused on sustainable energy. The company generates, transmits, and distributes energy in Chile, using hydro, thermal, and wind power sources. Headquartered in Santiago, Chile.

• ISIN: US29244TAA97
• Ranking: Senior unsecured
• Coupon: 7.85%, fixed
• Yield to Maturity: 5.33% annually
• S&P Global Ratings: BBB, outlook "stable"
• Gross Profit Margin: 32.97%
• Debt-to-Equity Ratio (D/E): 19.10%
• Minimum Entry Amount: 200 000 USD

Conclusion:

This bond ranks among stable investments, with a BBB rating indicating moderate risk. With a gross profit margin of 32.97%, the company shows sustainable profitability and a low debt level.

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