chapter 12 Flashcards
Eurobond
A eurobond issue is one denominated in a particular currency but sold to investors in national capital markets other than the country that issued the denominating currency
An example is a dutch borrower issuing dollar denomiated bonds to investors in the UK switzerland and in the netherlands. The markets for foreign bonds and eurobonds operate in parallel with the domestic national bonds market and all three market groups compete with another
Dragon bond market
exists where non japanese asian issuers sell bonds typically denominated in the US dollar through asian syndication.
Bearer bond
possession is evidence of ownership The issuer does not keep any records indicating who is the current owner of a bond
Registered bonds
the owners name is on the bond and it is also recorded by the issuer or else the owners name is assigned to a bond serial number recorded by the issuer.
When a registered bond is sold a new bond certificate is issued with the new owners name or the new owners name is assigned to the bond serial umber
Shelf registration
allows an issuer to preregister a securities issue and then shelve the securities for later sale when financing is actually needed. Shelf registration has thus eliminated the time delay in bringing a foreign bond issue to market in the united states, but has not eliminated the information disclosure that many foreign borrowers find too expensive and/or objectionable.
Global bond issue
is a very large bond issue that would be difficult to sell in any one country or region of the world. Consequently, it is simultaneously sold and subsequently traded in major markets worldwide. Global bonds are fully fungible because the identical instrument trades in all markets without restrictions.
Straight fixed rate bond issues
have a designated maturity date at which the principal of the bond issue is promised to be repaid. During the life of the bond, fixed coupon payments, which are a percentage of the face value, are paid as interest to the bondholders.
Eurobonds coupon payments are typically annually
Euro-medium-term notes
are typically fixed-rate notes issued by a corporation with maturities ranging from less than a year to about 10 years. Like fixed rate bonds euro MTNs have a fixed maturity and pay coupon interest on periodic dates.
Floating-rate notes (FRNs)
are typically medium-term bonds with coupon payments indexed to some reference rate. Common reference rates are either three-month or six-month U.S dollar LIBOR.
Equity related bonds
convertible bonds and bonds with equity warrants
Convertible bond
allows the investor to exchange the bond for a predetermined number of equity shares of the issuer
Floor value of a convertible bond
is its straight fixed rate bond value. Convertible bonds usually sell at a premium above the larger of their straight debt value and their conversion value
Bonds with equity warrants
Can be viewed as straight fixed -rate bonds with the addition of a call option (or warrant) feature. The warrant entitles the bondholder to purchase a certain number of equity shares in the issuer at a prestated price over a predetermined period of time
Dual currency bond
A straight fixed-rate bond issued in one currency, say swiss francs, that pays coupon interest in that same currency. At maturity the principal is repaid in another currency . Coupon interest is frequently at a higher rate than comparable straight fixed rate bonds. The amount of the dollar principal repayment at maturity is set at inception; frequently, the amount allows for some appreciation in the exchange rate of the stronger currency.
underwriting syndicate
a group of investment banks, merchant banks, and the merchant banking arms of commercial banks that specialize in some phase of a public issuance
