White Paper - DebtRay BondRanking, Illuminating the black box of issuance

In this white paper, we introduce the concept of BondRanking, outlining its scientific foundations and systematic approach. The proposed BondRanking methodology is designed to evaluate bond issuances based on their eiciency, and ultimately, their funding benefit to the issuer.

BondRanking focuses on two crucial aspects of the bond issuance: pricing and timing. By applying a quantitative valuation model, free from external influences, our approach ensures a market-neutral assessment of these core parameters. Furthermore, our methodology enables the financial quantification of pricing and timing, allowing issuers to measure their direct impact on the company’s profit and loss (P&L) statement. In recent years, structural shifts in financial markets and corporate finance have highlighted the need for a structured, independent, and market-neutral valuation framework. BondRanking addresses this need, providing issuers with a data-driven approach to optimizing issuance performance.

During the era of low or near-zero interest rates, funding management — particularly bond issuance — became a lower priority. However, the sharp rise in interest rates since 2020, driven by the highest inflation surge in 40 years, brought financial debt and funding back into focus. Many companies had taken on additional debt during the low-rate period, increasing leverage. As borrowing costs surged, profits shrank, and some businesses faced financial distress.

This crisis was worsened by the lack of preparedness. Actively managing debt structures is complex, and most companies lack the necessary personnel, technology, and tools. The question of optimal funding conditions has long been overlooked, leaving companies without the analytics needed to navigate volatile interest rate environments.

As a result, companies are paying structurally higher interest rates on their debt which is illustrated in a new issue premium analysis, and from the investor perspective this phenomenon is known as “the puzzle of excess corporate bond returns”. In this paper, we will examine this puzzle and quantify the extent of these excess costs from the issuers’ perspective. Furthermore, we will explain why our focus is on the primary market and highlight its direct impact on a company's P&L.

In Section 2, we conduct an empirical analysis to evaluate the issuance eiciency of corporate issuers and examine the implications of ineicient issuance pricing. This analysis serves as the foundation for Section 3, which explores the necessity of a new approach to the issuance process — one that enables issuers to optimize their issuance strategy eectively.

In Section 3, we will present a scientific research design that enables the determination of company-specific interest rates - BondRanking. This approach relies on two key methods: benchmarking and defining an appropriate peer group. A critical prerequisite for this analysis is precise data collection from the structurally opaque fixed-income market. As corporate finance continues to evolve, we aim for this methodology, BondRanking, to establish a new standard in bond issuance evaluation, enabling issuers to secure optimal terms, enhance investor confidence, and drive long-term financial capital efficiency.

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