Bond Assuance Paper

1016 Words 4 Pages
How does a Company issue a bond and what type of Bond is the best to issue?
The Bond Issuance process is process is complicated and companies generally hire a third party, and investment bank, to facilitate the process. The investment bank will generally have the expertise and experience to handle the technical and legal aspects of the transaction. However, first we need to explore what bonds are and why would a company want to issue them.
What are Bonds and Why do Companies Issue them
Our textbook defines bonds as “a long term contract under which a borrower agrees to make payments of interest and principal on specific dates to the holders of the bonds.” (Brigham, Houston, 2013 p.217). Bonds provide companies with needed capital in order to pursue business opportunities.
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The flexibility in bond characteristics can be attractive to companies because they have the ability to tailor the bond to their needs. Additionally, “Corporate bonds tend to be categorized as either investment grade or non-investment grade. Non-investment grade bonds are also referred to as "high yield" bonds because they tend to pay higher yields than Treasuries and investment-grade corporate bonds. However, with this higher yield comes a higher level of risk.” (Corporate Bonds,

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