COMMERCE 4FP3 Chapter Notes - Chapter 12: Debenture, Convertible Bond, Sinking Fund
29 Mar 2019
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Corporation"s written pledge to repay a specified amount of money along with interest. The legal conditions are described in a bond indenture. Trustee: bondholder"s representative: between time of issue and maturity, corps pay interest to bondholders, usually semi-annually, at stated rate (coupon rate) To borrow money to pay for major purchases: difficult or impossible to sell stock. The interest paid to bondholders is a tax deductible business expense. Issued in the country and currency of the issuer: 2 or more corp securities bundled by an investment dealer and sold at an overall price. Strip bonds: coupons and bonds are sold separately at significant discounts. Provisions for repayment: call feature, corp can call in or buy back outstanding bonds from current bondholders before the maturity date, most agree not to call bonds for the first 5-10 years after they are issued.
