How does KDP determine its bond recommendations?
Once a Default Risk Ranking is established (see “What is a KDP Default Risk Ranking?” above), the appropriate recommendation is derived by referring to the yield requirements that KDP has assigned to each Default Risk Ranking. Issue specific yield requirements for a given Default Risk Ranking are adjusted for maturity, seniority, security, and whether the issue is a discount note or PIK. If the yield on the bond issue in question falls within the required range for that default risk ranking, it receives a HOLD recommendation; if it is lower than the range, it rates a SELL; and if it is higher, a BUY. Our investment horizon is longer term due to the difficulty in timing the market for high yield bonds. KDP uses yield to worst as the total return measure for the bond issues of any company with a KDP Default Risk Ranking of 1+/1+ through 3/5. This is due to the relative likelihood that the company will not default on its obligations, and that the full par amount on these issues will be pa
