Leveraging on bonds and buying CDO's

Bond XYZ pays 5% annually
1 Delta Put expiring same time will cost me 1% of total Bond value.

Does it make sense to lever up on the bonds and buy enough puts to offset capital lost if XYZ fails to pay? It really acts like a CDO.
What are the risks I am taking? IF XYZ cant pay debt they go bankrupt shares will trade near 0.

 

Interest rate risk is one -- both puts and credit will drop in MTM if rates go up.