The bond market When issuers declare bankruptcy Fidelity

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Clicking a link will open a new window. – 01/18/2022 1135 laws govern how US companies go out of business or attempt to recover from financial distress. When a company files for Chapter 7, it ceases operations and its assets are sold to repay creditors and investors. Chapter 11 bankruptcy allows a company to reorganize in hopes that it may again become profitable. Once a restructuring plan is approved in court, the bankrupt corporation emerges as a newly organized company with less debt. While either type of bankruptcy often means an investor loses money they had invested in the company's stock, investors holding bonds are much more likely to recover at least part of the value of their initial investment. The fates of investors in bankruptcy are determined by laws which specify the order in which creditors are repaid. Like an airline gate agent directs passengers when to board a plane depending on whether they hold first class, coach, or basic economy tickets, a bankruptcy court divides creditors into groups with differing rights of repayment. This hierarchy of repayment typically looks like this: on the bond research page, which can compare 120 yields at a time. Fidelity's Corporate Bond Connect feature lets investors research analyst opinions and fundamental data. For municipal bonds, DPC Data provides news about issuers and material events data. "We strive to provide investors with resources to research bonds and issuers before they invest," says Richard Carter, Vice President of Fixed Income Products at Fidelity. "It's important to know what you own and why."

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