Babson Capital's investment grade and high yield team manages over $40 billion in corporate securities.
We take a credit-intensive approach to the selection of investment grade and high yield securities for our investment portfolios. When constructing a portfolio of investments we determine where favorable value exists within markets based upon a fundamental, bottom-up analysis of individual investments and an assessment of how they compare on a relative value basis to other investment alternatives.
We focus on company and industry analysis, with particular attention paid to:
- free cash flow generation capability
- the quality of management
- capital structure
We believe in prudent diversification as a critical safeguard against the adverse events that may affect results under even the most disciplined investment approach
Investment Process
Our Investment grade and high yield process looks to add value through a sharp focus on credit research. We use company financial statements, industry publications, third-party research reports, and direct contact with those closest to the company to determine the soundness of an investment opportunity.
Our analytical process focuses on:
The Company
- Thorough evaluation of fundamentals
- Free cash flow/repayment ability
- Strong balance sheet and hard asset coverage
- Defensible business position
- Management checks
The Industry
- Emphasis on stable fundamentals
- Typically underweight retail and deep cyclicals
- Avoid capital intensive, high growth industries
- Legislative risks
- M & A activity
The Issue
- Seniority and capital structure
- Covenants
- Liquidity
- Relative value vs. enterprise value
Credit Selection is driven by
- Strength of fundamental investment thesis
- Strength of company's competitive position
- Favorable relative valuation
- Positive credit check feedback (e.g., customers, suppliers, industry experts, etc.)