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CFS C11TX: Debt Financing (other types of debt (a. sovereign debt: is debt…
CFS C11TX: Debt Financing
corporate debt
a. Public debt
i. the prospectus
: a public bond issue is similar to a stock issue
must include an indenture
original issue discount (OID)
ii. bearer bonds and registered bonds
bearer bonds are like currency: whoever physically holds the bond certificate owns the bond
registered bonds: the issuer maintains a list of all holders of its bonds
iii. types of corporate debt
(4)
notes (unsecured debt)
debentures (unsecured debt)
mortgage bonds (secured debt)
asset-backed bonds (secured debt)
key term: tranches
iv. seniority
subordinated debenture
v. Bond markets
domestic bonds
are bonds issued by a local entity and traded in a local market, but purchased by foreigners
foreign bonds
are bonds issued by a foreign company in a local market and are intended for local investors
Yankee bonds
foreign bonds in the US
Samurai bonds
foreign bonds in Japan
Bullldogs
foreign bonds in the UK
Eurobonds
are international bonds that are not denominated in the local currency of the country in which they are issued
Global bonds
combine the features of domestic, foreign, and Eurobonds , and are offered for sale in several different markets simultaneously
b. Private debt
i. term loans:
a bank loan that lasts for a specific term
syndicated bank loan
revolving line of credit
ii. Private placements
: is a bond issue that does not trade on a public market but rather is sold to a small group of investors
other types of debt
a. sovereign debt:
is debt issued by national governments
long bonds
TIPS (Treasury Inflation-Protected Securities)
stop-out yield
STRIPS (separate trading of registered interest and principal securities)
b. Municipal bonds "munis"
are issued by state and local governments
serial bonds
revenue bonds
general obligation bonds
double-barreled
c. Asset-Backed securities (ABS)
asset securitisation
mortgage-backed security (MBS)
prepayment risk
collateralised debt obligation (CDO)
Bond Covenants
covenants are restrictive clauses in a bond contract that limit the issuer from taking actions that may undercut its ability to repay the bonds
repayment provisions
callable bonds
a. call provisions
call date
call price
yield to call (YTC)
b. Sinking Funds
balloon payment
c. Convertible Provisions
conversion ratio
convertible bonds
warrant
conversion price
summary