Bank Negara Malaysia Case Study

758 Words 4 Pages
On the other hand, bond also act as a source of finance. The bond is one of the debt securities (debt instruments) which issued by issuer and sell it to the investors. The bond will act as a loan whereas the issuer is the borrower and the investor is the lender, the coupon is the interest. (Certified Financial Planner, 2015) Every bond will have a maturity date and also the par value. Maturity date (due date) is the date that the loan will be paid off and the par value is the nominal value of a bond. The interest will pay at the fixed period, most of the company pays it semiannually. For many company, bonds may be used to raise the external funds to finance long-term investments and to fund the corporate activities, however, in the case of …show more content…
The Bank Negara Malaysia (BNM) facilitates the central government to issue the bond and also issues its own bonds. Under corporate, there are financial institutions, non-financial institutions, corporations, and quasigovernment institutions. For example, the major issuers of the quasi-government bonds are Khazanah and Cagamas. (Team, 2012) For the foreign issuers, they can issue bond as well but they should open, maintain and manage their ringgit or foreign currency account with licensed onshore banks in Malaysia. Besides issuers, there are also other parties who will take part in issuing the bonds. They are lead arranger or principal adviser, adviser, underwriter, facility agent, paying agent, legal counsel, Shariah adviser, trustee, credit-rating agency, financial guarantee institution and bond pricing institution. The transaction of bonds is undergoes in the bond markets such as Bursa Malaysia. Malaysian ringgit and US dollar are the most common currencies which the bonds are denominated. (Team, …show more content…
Another reason is the interest rate the company pays to the bondholders is much lower than the interest rate of bank loan. There are some advantages of the bonds. The first advantage is tax deduction of interest payment. The coupon payments are being deductible expenses on the income tax return. (averkamp, 2015) The next advantage is increasing in earning per share. During the good time, the shareholder may receive extra earnings after deducting the coupon payment to the bondholders under the condition that the bond is a fixed-income security. Maintaining the control of the firm is also one of the advantages. The issuance of bonds has no effect on the ownership of the company, the bondholder just as a creditor and has no right to control the firm. The next advantage is bonds can issue at any time. The firm can issue the bonds once the firm needs the extra

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