RASING CAPITAL

THROUGH
CORPORATE BONDS
 What is a bond?

A bond may be described briefly

as a long-term obligation on the
part of the issuing corporation
which is set forth in writing and
made under seal.
 What is a bond?

The typical bond contains an

unconditional promise on the part
of the issuing corporation to pay a
definite sum of money at the
maturity date as well as the
interest due thereon based on a
stipulated percentage as
evidenced on the bond certificate.
 Features of bonds

Redemption Provisions to
enable the corporation to pay
off the bonds even before the
date of maturity.
 Features of bonds

Conversion Provisions is one

that gives the security holder the
right to exchange his bonds for
some of the corporation on a
fixed basis described in the
indenture
 Features of bonds

Sinking fund provisions which

imposes upon the corporation
the obligation to set aside a
certain sum from the earnings
periodically for the purpose of
reducing or retiring the bonded
indebtedness.
 Corporate Debt
Instruments

Corporate Bonds - Elements

Maturity Date date that debt must be
repaid
Term Length of time between issue date
and maturity date
Par value/face value/maturity value Price at
which the bondholders are repaid
Interest rate/coupon rate A rate expressed
as a percentage of its par value
Can be fixed, variable, or a stepped-up rate
 Corporate Debt
Instruments

Corporate Debt Securities Types

Bearer bonds No names, but holder
sends paying agents the coupons to
receive interest
Registered bonds bear the name of
the owner and interest payments are
sent automatically to the registered
owners
 Corporate Debt
Instruments

Corporate Bond Securities Types

Secured Backed by specifically identified
assets as collateral. In the event of a
default, assets are sold to cover the debt
Mortgage Bonds Secured by liens on the real estate properties
and physical assets of the corporation
Equipment Trust Certificates - A debt instrument that allows a
company to take possession of an asset and pay for it over time.
The debt issue is secured by the equipment or physical assets, as
the title for the equipment is held in trust for the holders of the
issue. When the debt is paid off, the equipment becomes the
property of the issuer, as the title is transferred to the company.
Collateral Trust Bonds Secured by securities of other
companies owned by the corporation
 Corporate Debt
Instruments

Corporate Bond Securities Type

Unsecured (or Debentures) - Backed only
by the general creditworthiness and
reputation of the issuer. Like other types
of bonds, debentures are documented in
an indentureDebenture Bonds junior to other
Subordinate
specified creditors
Convertible Debentures - Provides bondholders
the right to convert their bonds into common stock
of the issuing company.