The priority in which we use the criteria mentioned in the previous section is of course very subjective; in the most desperate situations often one needs to use what is available. This is even more true when trying to price corporate debt.
If we are trying to price a bond issued by an entity lacking any sort of government backing, one could apply some of the principles discussed above or alternatively some of the following ones.
We could consider another company in the same country similar in terms of activity, level of debt, or credit rating.
We could consider a foreign company in the same industry, claiming that the credit health of our issuer is linked to the global health of the industry.
We could use a foreign company in a similar industry with the same weight within its respective country.
We could also claim that if industry X plays a role in country A similar to the one played by industry Y in country B, we should use the liquid information of a member of X to price the illiquid debt of a member of Y. This can easily be seen in terms of different commodities (although one could argue that they are not different industries): If we agree, say, that rice is to
Vietnam what cocoa is to Cote d'lvoir, then we could use the credit information of a Vietnamese rice producer (assuming we have it) to price a debt issued by an Ivorian cocoa producer. The information can be used either in absolute terms or relative to their respective country, that is, by thinking that the spread of the rice producer with respect to Vietnam credit must be the same as the spread of the cocoa producer over the one of Cote d'lvoir (assuming that we have it). These two approaches mean that we need to weigh whether the credit of each producer is driven more by the agricultural commodities market or by their own national markets.
The question, like all the questions one needs to answer when choosing a proxy, is far from trivial. To conclude, the exercise of choosing a proxy is very useful and can be applied to any illiquid market information beyond the specific one of bond prices we have mentioned.
-  The author remembers a former colleague's heroic but futile effort to sell Yasar Holdings as a sort of Turkish Parmalat.