Corporate Bonds †Business Finance Essay

Bond is defined as a vast-term debt of a firm or the government set forth in writing and made under seal.Kinds of Bond1. Government Bonds atomic number 18 those issued by the government to finance its activities.2. Corporate Bonds ar those issued by private corporations to finance their long -term funding requirements.Bonds as Distinguished from Stocks1.A amaze is a debt instrument while stock is an instrument of ownership. 2.Bondholders have priority over stockholders when payments are made by the company. 3.Interest payments due to bonds are fixed, while dividends to stockholders are contingent upon earning and must be declared by the board of directors. 4.Bonds have specific maturity time, at which time, refund of the principal is due. In contrast, stocks are instrument of permanent capital financing and does not have maturity dates. 5.Bondholders have no vote and no specify on the management of the firm, except when the provisions of the bond and the indenture agreement ar e not met.Alternative way of bond IssuanceBonds are issued finished any of the following ways1. Public Offering involves selling of corporate bonds to the general public through investment bankers.2. Private Placement is a cut-rate sale of bonds directly to an institution and is a private agreement between the issuing company and the financial institution without public examination.I. BONDS by Type of SecurityDebentures are general credit bonds not secured by specific prop.Mortgage Bonds are those which are secured by a lien on specially named property as land, buildings, equipment, and other fixed assets.Assumed Bond There are times when a corporation buys another corporation, or is merged with another.Guaranteed Bonds is a type of bond in which the payment of interest, or principal, or both, is guaranteed by one or more individuals or corporations.Joint Bonds There are times when a property is owned jointly by several companies. II. BONDS by manner of participation in earningsCo upon Bonds these are bonds having attachments of a series of postdated certificates payable to the bearer for the interest over the life of the bond.Registered Bonds these are bonds wherein the names of the owners are recorded on the transfer books of the company.Participating Bonds these are bonds which stipulate a fixed voucher rate but which withal provide a method of receiving additional income over and above this minimum sum.Bonds with Warrants Bonds may also have warrants attached to them. The warrants is an woof or a right, exercisable by its holder, to purchase stock at a stated price during a stipulated period of time.Bonds with Junior Security Attached these are bonds which are issued along with some shares of stock in a package or block sale.III. BONDS by method of retirementSerial Bonds is one among a group of bonds a part of which mature semi-annually or annually instead of all on a single date.Sinking Fund Bonds Bonds may also be gradually retired with the provision of a sinking fund.Callable Bonds The are bonds with provisions that the terms of the issue can be cancelled or called. similar Bonds These are bonds which may be exchanged for the common stock of the issuing corporation at a fixed price, at a pre-determined redemption date and at the option of the bondholder.Perpetual Bonds These are bonds which cannot be redeemed by demanding repayment.THE INDENTURE AND TRUSTEEIndenture is a contract between the corporation and the regent on behalf of the bondholders.Trustee is a person who handles monies or property on behalf of another in a trust.