Watch out, financial engineers are about

Leveraged buyouts and auto company problems are taxing the minds of bond investors, but there's a more insidious form of event risk they should be wary of. Company executives, under pressure from boards and active investors including hedge funds, are starting to engage in financial engineering to try to boost their stock price. Bondholders are set to lose out. Antony Currie reports.

WHAT IS THE biggest event risk that buy-side credit analysts will be grappling with in the next few months? The answer, given the turmoil of recent weeks, might seem obvious. In fact, though, it’s not the fear of credits in a portfolio being subject to a leveraged buyout, whether real or rumoured. Nor is it how to deal with the fallout from the downgrades of the unsecured debt of Ford Motor Company and General Motors to junk status.

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