Beruflich Dokumente
Kultur Dokumente
A bond is defined as a long term debt of a firm or government set forth in writing and
made under seal.
Kinds of bond
There are kinds of bods.
Government bonds; and
Corporate bonds.
Kinds of bond
Government bonds
Are those issued by the government to finance its activities.
Corporate bonds
Are those issued by private corporation to finance their long-term funding
requirements.
Bonds as distinguished from stocks
As distinguished from stocks, bonds posses the following characteristics.
1. A bond is a debt instrument, while stock is an instrument of
ownership.
2. Bondholders have priority over stockholders when payment are
made by the company.
3. Interest payment due to bonds are fixed, while dividends to
stockholders are contingent upon earning and must be declare by
board of directors.
4. Bonds have specific maturity date, at which time repayment of the
principal is due. In contrast, stocks are not have maturity dates;
and
5. Bondholders have no vote and no influence on the management
of the firm, except when the provisions of the bond and the
indenture agreement are not met.
2. Private placement.
BOND ISSUANCE
Public offering
Involves selling of corporate bonds to the general public through investment bankers.
These investment banker provides assistance in the issuance of the bonds by:
1. Helping the firm determine the size of the issue and the type of
bonds to be issued;
2. Establish the selling price; and
3. Selling issue.
Private placement
Is a sale of bonds directly to an institution and is a private agreement between the
issuing company and the financial institution with out public examination.
Private placement offers the following advantages.
1. The issue can be tailor-made to fit the needs of the issuing firm,
as well as the investing firm;
2. The issue does not have to be registered; and
3. There are no underwriting fees paid by the issuing firm.
CLASSES OF BONDS
by type of security;
by manner of the participation in earning; and
by method of retirement or repayment.
Classification of bond as to Type of security
1. Earning and general unpledged assets of issuing company (debentures);
2. Earning of issuing company plus pledge of specific property (mortgage
bonds). This is further classified as follows:
a) Real state mortgages (senior and junior liens)
i.
Closes-end issues
ii.
Open-end mortgages
b) Chattel mortgages
3. All or some of original security plus general credit or another company which
may be:
a) Assumed bonds
b) Guaranteed bonds
4. Combined earnings of allied companies plus collateral protection in some
cases (joint bonds).
Classification of bond as to Type of security
Debentures.
Debentures bonds are general credit bonds not secured by specific property.
Mortgage bonds
Mortgage bonds are those which are secured by a lien on specifically named
such as land, building, equipment, and other assets.
Specific property pledge are of two general types:
1. Real state which consist of land and property attach to the
land.
2. Chattels which consist of personal and movable propety.
Figure 10.
In the study of bond issue, two terms are important; (1) the
indenture; and (2) the trustee. Both perform the common function
of protecting the bond holders.
The Indenture
The trustee
BONDS
CORPORATE BONDS
Presented by:
Soria, Geraldin C.
Pioquinto, Deo Mhar A.
Borres, Sorick D.
Present to:
Veronica Abucay, MBA/DBA