Corporate bonds are an increasingly popular financial instrument. They offer investors attractive returns with a relatively low level of risk. On the other hand, more and more companies are choosing to issue their own bonds. What are these instruments and where do they come from on the market?
Why companies emit corporate bonds
The issue of corporate bonds is one of many ways to raise capital for companies. They can thus gain money for development without giving control over the company to anyone, as is the case with shares. The bonds also give the possibility to control the debt (the bank may terminate the loan agreement and demand an early repayment or demand additional collateral, the bond buyer does not have such rights, unless the company breaks the fixed emissions of the contractual bonds), and provide flexibility and scalability of raising capital.
In turn, for investors, bonds are a good and quite sure way to multiply savings. You can earn from regular interest payments or by trading in bonds on the Catalyst market.
Bond issue process
Only limited-liability companies, joint-stock companies and limited joint-stock partnerships are authorized to issue bonds. If a company does not have such a legal form, it must first be transformed accordingly.
The issue may be in private or public form. In the first case, bonds are offered to specific investors, which can not be more than 149. Public issue is associated with the introduction of bonds to the Catalyst market.
The company wishing to issue must establish the terms of the issue, adopt a resolution on the issue of bonds and send out purchase proposals to investors interested in the purchase of bonds. It will also be necessary to conclude a contract with an issue agent who will act as an intermediary when introducing bonds to the market.
If, however, the company is interested in introducing bonds on Catalyst (which is expected by investors), it will be necessary to conclude a contract with a market maker that will ensure the liquidity of trading. It will also be necessary to register bonds in the National Depository of Securities and meet other formalities related to entering the Catalyst market.
The role of brokerage houses in raising capital for companies
In the case of a bond issue, it is a good idea to rely on the intermediation of a specialist such as a brokerage house. A very important task in the issuing process is to reach and attract individual and institutional investors, what brokerage houses do.
The service of the whole process is comprehensive, starting from the preparation of the prospectus and the information memorandum, through searching for interested investors, to registration of securities at KDPW and placing them on the market.