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What is a Rule 144A High-Yield Offering?

Updated: 9/13/2023
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Lexagon

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15y ago

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A high-yield offering refers to an bond issuance that pays the bond purchasers a relatively high rate of return due to the correspondingly high level of risk associated with the issuance. The rate of return acceptable to purchasers depends on the perceived risk of default by the issuer, as traditionally determined by major credit ratings agencies. The higher the risk that an issuer will default on its obligations, the higher the yield that the issuer will have to pay to purchasers of bonds (lenders)to borrow money. Bonds sold in interstate commerce are subject to the Securities Act of 1933 and as such must be registered with the SEC or exempt from registration to comply with federal regulatory requirements. Rule 144A is an exemption from registration that allows securities (ex., bonds) to be offered or sold only to qualified institutional buyers (QIBs) and only if the securities were not, when issued, listed on an exchange or quoted in an over-the-counter system. Securities offered to Rule 144A are "restricted securities" subject to holding period, amount and manner sales restrictions. So, a Rule 144A high-yield offering is an offering of high-yield debt by an issuer according to the requirements of the Rule 144A exemption.

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Q: What is a Rule 144A High-Yield Offering?
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What is a Rule 144A High Yield Offering?

A high-yield offering refers to an bond issuance that pays the bond purchasers a relatively high rate of return due to the correspondingly high level of risk associated with the issuance. The rate of return acceptable to purchasers depends on the perceived risk of default by the issuer, as traditionally determined by major credit ratings agencies. The higher the risk that an issuer will default on its obligations, the higher the yield that the issuer will have to pay to purchasers of bonds (lenders)to borrow money. Bonds sold in interstate commerce are subject to the Securities Act of 1933 and as such must be registered with the SEC or exempt from registration to comply with federal regulatory requirements. Rule 144A is an exemption from registration that allows securities (ex., bonds) to be offered or sold only to qualified institutional buyers (QIBs) and only if the securities were not, when issued, listed on an exchange or quoted in an over-the-counter system. Securities offered to Rule 144A are "restricted securities" subject to holding period, amount and manner sales restrictions. So, a Rule 144A high-yield offering is an offering of high-yield debt by an issuer according to the requirements of the Rule 144A exemption.


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As there is a repeated x-coordinate, x = f(y), giving:As it is a parabola, x = ay² + by + c, so substituting the known points:(0, 0) → 0 = 0²x + 0b + c → 0 = c(20, 12) → 20 = 12²a + 12b + c → 20 = 144a + 12b + c(0, 40) → 0 = 40²a + 40b + c → 0 = 1600a + 40b + cFrom equation 1, c = 0, so substituting in the second and third equations gives two new equations involving two unknowns:20 = 144a + 12b0 = 1600a + 40bThe second of these can be simplified to give: 0 = 40a + b→ b = -40aThis can be substituted back into the first to give:20 = 144a + 12 b→ 20 = 144a + 12(-40a)→ 20 = 144a - 480a→ 20 = -336a→ a = -5/84→ b = -40a = -40(-5/84) = 50/21→ x = -5/84 y² + 50/21 y→ 84x = -5y² + 200y→ 84x = 200y - 5y²The parabola has equation 84x = 200y - 5y²


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