Boom in Risky Hybrid Debt Is Spreading From US Around the World

Hybrid bond sales are spreading around the globe at a record pace, as companies grab the chance to pad their balance sheets in a market supercharged by a rule change.

This type of risky subordinated debt took off in the US from last year after Moody’s Ratings shifted its criteria to boost the equity content of these notes, categorizing them as half equity. That enabled borrowers to use hybrids to raise money without diluting their shareholders or hurting their debt ratings.

Now that boom — helped by the lowest borrowing costs since the global financial crisis — is catching on ...