May 1, 2013
By Karen Schwartz
For high-yield investors, Mexican glassmaker Vitro’s messy debt restructuring was a sharp reminder of the perils of dabbling in sub-investment grade paper. In April, the company finally put an end to the wrangling over its $1.2 billion 2009 default.
A four-year legal battle was probably not what most investors had in mind when they bought the paper. And as the tussle dragged on, bond investors talked of charging a Vitro premium for junk bonds.
Yet, despite its warning to investors, Vitro has not put fund managers off investing in sub-investment grade debt. On the contrary, junk-rated companies from Latin America have roughly doubled their annual debt sales since the
Cash is rushing into sub-investment grade debt amid low returns elsewhere. But as the market picks up, investors warn not all is what it seems