Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
10 Cards in this Set
- Front
- Back
|
Debenture |
An uncovered debt, while a bind can be covered by a mortgage on the companys equity. Also known as secured debt |
|
|
Bill or T bill |
Used as a short term debt instrument, expires within a year |
|
|
A note |
Unsecured loan with a maturity date less than 10 yrs |
|
|
Indenture |
Written agreement between a debtor and debtee where details of the loan are specified |
|
|
Hierarchy of debt |
1. Senior secured debt: debt with collateral, could be a building or any other asset. 2. Second lutne loans: same as before but second. 3. Senior unsecured debt: highest type of debt in hierarchy without collateral. 4. Subordinate or junior debt: lowest kind of debt in hierarchy 5. Shareholder loans 6. Preference shares 7. Ordinary shares |
|
|
Three basic methods to issue shares for cash |
1. Firm commitment: invesment banks buys the securities for less than the offering price and accepts the risk of not being able to sell them. Banker=underwriter. Difference between what the underwriter pays and what the offering price is is called the discount of spread. 2. Best efforts: here the investment bank avoids the risk, it does not purchase the shares, but acts as an agent receiving a commission. 3. Dutch auction underwriting: the underwriter does not set a fixed price. There's an auction where investors can bid for the shares. Also known as uniform price auction. |
|
|
Loan commitments |
An arrangement that requires a bank to lend up to a maximum pre specified loan amount at a pre specified interest rate. 1. Revolver: when the funds flow back and forth between the bank and the firm without any predetermined schedule. 2. Non revolving: one in which the firm cannot pay down the loan and then subsequently increase the amount of borrowing. |
|
|
Dirty price vs clean price |
Clean price: a quoted price in which the accrued interest is not included in the price. The accrued interest is deducted to arrive at the quoted price. Dirty: the price you actually pay for the bond. Includes the accrued interest, AKA: Full or invoice price. |
|
|
Warrant |
A security which gives the owner the right to buy a specified number of shares for a specified price during a certain period. Similiar to call options, warrants usually have a longer maturity date. A call option is issued by an individual, a warrant by a company. |
|
|
Convertible |
Like a bond with warrants. Gives the right to the owner to exchange this bond to a number of shares until the maturity date. The number of shares the holder will recieve is the conversion ratio. The conversion price is the ratio of the debt to the conversion ratio. The conversion premium is the difference between the conversion ratio and the market value of the shares. |
