A bond loan is a fairly profitable type of business lending; it has more advantages than a simple loan; it can be taken out when a company does not have enough finance to resolve production issues.
A bonded loan is a form of lending for which the borrower uses simulated bonds. By bonds we mean a paper that is a permitting document for the owner to receive the nominal value or an equivalent part of the company.
A company issues bonds to attract investors for the future or to improve its current financial position. By selling them, the company borrows funds from the buyer, which it undertakes to return at a set time.
What types of bonds are there for a bond loan?
Thanks to this method of attracting borrowed funds, when evaluating them, the issuer has the right to include a certain amount of interest payments in non-operating expenses, which will make it possible to reduce the tax base on profits.
Types of bond loans
Bonded loans are divided as follows:
- By term – urgent, medium-term and long-term;
- Purpose – commercial, internal;
- By issuer – corporate, municipal, state.
There are also external loan bonds; their issuance began in 2013.
Varieties by date
Urgent
Loans are issued for a period of up to a year.
Medium term
Loans from 1 to 5 years are considered coupons or are called notes, if the circulation period of these securities is increased to 10 years, in which case they are uncertificated coupon securities. They are paid every six months.
Important: such bonds are especially popular among portfolio mutual funds. This is explained by the optimal balance between short-term and long-term types.
Long-term
Bonds are issued by the state and have a maturity of 20–30 years. Important: since the issuer of these securities is the government, they are considered the most reliable and conservative.
According to the law, the placement of shares on the primary market ranges from 3 months to 1 year.
To purchase securities, you need to have knowledge in the field of securities trading and study all the nuances of behavior on the stock exchange. Important: before starting trading, you should obtain a brokerage account with access to the exchange.
Conclusion
Bond loans are the optimal solution to financial issues for an enterprise, an opportunity to increase production turnover and become competitive.
In recent years, companies have widely used bond loans to attract debt capital, which are gaining increasing popularity, as they have certain advantages over bank loans. Before talking about the benefits of bond loans, let's consider the fundamental properties of bonds.
A bond is a debt security that reflects a borrowing relationship between investors and the issuer. Investors who purchase bonds are creditors. Issuers are companies that issue bonds. They are borrowers.
When issuing bonds, companies establish the main parameters of the bond issue, which include:
- ? The face value of a bond is the amount that the company agrees to pay investors when the bonds are redeemed. Typically, the face value of a bond is 1,000 rubles, but it can have any other value that is a multiple of ten. The par value of the bond and the number of issued bonds are indicated in the issue prospectus. The total cost of all bonds, calculated at their face value, is the issue volume.
- ? Coupon rate is the percentage of the face value that the issuer pays to bondholders. If the coupon rate is 12% with a par value of RUB 1,000, this means that the company will pay investors a coupon income of RUB 120. per year for the entire term of the bond. Payment of interest on bonds is a strict obligation of the issuer. This fundamentally distinguishes bonds from stocks. The shares pay dividends. The decision to pay dividends is made by general meeting shareholders, who may refuse dividends even if there is a profit, since funds are needed to sell investment projects. Interest payments on bonds are mandatory.
If the issuer fails to pay the coupon income, bondholders can claim the amounts due to them through the courts. Because the payment of interest is a strict obligation for the issuer, there must be a stable source of payment of this interest. In accordance with Russian legislation, the amounts of coupon payments within the established standard are included in the company's expenses. At the time of preparation of this book, companies were allowed to write off coupon payments in the amount of 1.1 times the refinancing rate of the Central Bank of the Russian Federation as expenses. If the coupon rate is set at 15%, and the refinancing rate is 10%, then the company can write off payments of 11% to cost, and the remaining 4% will have to be paid from net profit.
Sometimes companies issue zero-coupon bonds, i.e. No coupon payments are made during the life of these bonds. In this case, the investor receives income due to the fact that the company, when issuing bonds, sells them to investors at a price below par. The difference between the face value and the price of the bond forms the investor's income. Deadline zero coupon bonds, as a rule, does not exceed one year.
Repayment period. When issuing bonds, a company specifies a maturity date upon which the bonds are extinguished and the company pays investors an amount equal to the face value of the bond. Simultaneously with redemption, the last coupon for this security is paid.
Companies resort to issuing bonds in order to obtain borrowed capital. Unlike a bank loan, bonded loans ensure the attraction of credit resources for longer periods. In industrialized countries, it is common to issue bonds with a maturity of 10-15 years. The Russian bond market is young and is little more than 10 years old. The average period for which Russian bonds are issued is 3-4 years. As the corporate bond market develops, the terms of bond loans will increase.
There is a steady trend in the debt financial market towards a reduction in the role of bank loans in financing the activities of corporations, which are being replaced by bond loans. The reason for this process is that attracting financial resources through the issue of bonds for a company in a number of cases is more profitable than borrowing cash from commercial banks. This phenomenon is called the process securitization (securitisation) financial markets.
The term "securitization" became widespread in international financial markets in the 1980s. This term emphasizes the importance of the processes of replacing traditional financial transactions in the form of bank loans with new financial instruments that ensure the attraction of financial resources through the issuance of securities. The securitization process is objectively due to the fact that it provides certain advantages to both issuers and investors compared to traditional banking operations.
Liquidity of financial instruments. Unlike a bank deposit, debt securities have the property of liquidity, which creates more comfortable conditions for investors.
Example. The investor places funds on a bank deposit for a period of one year at 8% per annum. If an investor wants to withdraw his funds after 6 months, then he needs to terminate the deposit agreement with the bank. The bank goes to terminate the contract, but does not pay the interest accumulated for six months in full. The bank usually reduces them to the level of interest on demand deposits, which ranges from 0.1 to 1% per annum. Thus, the investor receives his money, but with financial losses. When an investor invests money in purchasing bonds, it is easier for him to return them before the bonds expire. To do this, he can sell bonds on the secondary market. When completing a transaction, the buyer will pay the owner of the bond not only its cost, but also the interest accumulated during the holding period. Securities, unlike traditional bank deposits, have the property of liquidity; they can be sold and received cash without significant financial losses.
Time frame for attracting financial resources. The Russian banking system is currently able to mainly serve the short-term needs of enterprises for financial resources to replenish working capital. More than half of all loans are issued for a period of no more than one year. The terms of the loan are determined not by the desire of the borrower, but by the financial condition of the bank, and above all by the terms of the funds raised. The term structure of bank liabilities is characterized by a predominance of short-term deposits. More than 70% of deposits are deposits with a maturity of up to 180 days. Short liabilities (raised funds) also determine short assets (credit resources). In most Russian banks, the period for raising funds does not exceed 1-2 years. Under these conditions, the bank cannot issue long-term loans, since it has a predominance of short-term liabilities.
By issuing bonds, the company itself constructs the bond issue and determines the activity of securities circulation. When setting bond maturity dates, the issuer is guided by how many years it needs investment resources for and whether the market is ready to provide it with these resources for a given period. Experience shows that investors carefully evaluate the financial condition of the issuer, its development prospects and ability to service the bond issue. If investors evaluate the issuer as a reliable borrower, then they are ready to buy long-term bonds.
Volumes of attracted financial resources. Bonds allow companies to reach a wide range of investors, which allows the issuer to raise a significant amount of funds. Commercial banks have restrictions (limits) on lending per borrower. This standard aims the bank at diversifying its loan portfolio and reduces the risk of bank bankruptcy in the event of failure of any borrower to fulfill its obligations to the lender. This standard is related to the bank's capital. Due to the fact that the equity capital of Russian banks is small, the amount of loans to one borrower is small, since it is limited by the relevant standard.
When issuing bonds, the company turns to a wide range of people, each of whom makes a decision to invest in bonds of a particular issuer based on their ideas about the risk of this issuer and the required level of profitability. Ultimately, if the issuer is sufficiently reliable, then by issuing bonds it can attract financial resources in a much larger volume than a bank loan.
It should also be taken into account that a bond issue placed among a large number of investors provides the issuer with independence from a single creditor. When lending, the bank may change its credit policy, stop lending if the financial condition deteriorates, require the borrowing company to transfer all cash payments to the lending bank, set the borrower a limit on the minimum balance on the current account and set other conditions. The issue of bonds frees the company from imposing any conditions on the part of creditors other than those specified by the issuer in the prospectus.
Strategic goals of the company's development. The issue of bonds is more consistent with the strategic goals of companies that seek to enter the capital market through a public issue of securities. In the lending process, a purely individual relationship develops between the creditor bank and the borrower enterprise, regulated by a loan agreement, which specifies an individual interest rate, collateral conditions, repayment terms and other loan parameters. Only the bank knows that the borrower fulfills his obligations under the loan agreement on time and in full. Issuing bonds contributes to the creation of a public credit history. By fulfilling all obligations under a bond loan, the issuer earns not only a reputation as a reliable borrower, but also a reputation as a financially stable company. This will allow you to:
issue new bond issues for longer periods and at lower interest rates;
prepare the financial market for the company to enter the market with other types of securities;
create conditions for entering Western capital markets through the issue of Eurobonds and the issuance of depositary receipts.
Ability to manage debt. If the bond issue is marketable and the securities are traded on the secondary market, then the issuer can buy its own bonds on the market. If interest rates rise compared to the coupon rate, bond prices become lower than par, and it is profitable for the issuer to buy bonds at this price in the present rather than redeem bonds at par in the future. Undoubtedly, this operation can only take place if the issuer has available funds. In addition, for repurchased bonds the issuer saves on coupon payments. When interest rates fall and bond prices rise, the issuer can sell the bonds and receive a return on the difference between the sale price and the purchase price. Through transactions with bonds on the secondary market, the issuer can significantly reduce the cost of servicing a bond issue.
Thus, bond loans have a number of significant advantages compared to bank loans, which are taken into account by both issuers and investors.
Restrictions associated with the issue of bonds. It should be noted that not all companies can or are able to issue bonds. The issue of bonds places increased demands on the issuer, which are manifested in the following.
- ? Greater financial openness of the company to investors. A company must disclose information about its financial condition in its bond prospectus, which allows investors to assess risks and make informed decisions about the advisability of purchasing bonds of this particular company. At the same time, investors are usually interested in the directions of investment of funds and their effectiveness. In the future, market participants will conduct constant monitoring of financial flows and directions of use of raised funds.
- ? Disclosure of information about the business and major owners. Bond investors typically want to know who they are entrusting their money to.
- ? The issuer's responsibility for paying cash on bonds is higher than with a bank loan. If a company has financial difficulties, then when lending, you can agree with the bank to restructure the loan or postpone the payment period. With a bond loan, failure by the issuer to fulfill its obligations threatens the company with the fact that investors will go to court with a claim for damages, and even if the company fulfills its obligations, its reputation will be lost.
Companies must consider these factors when choosing a source of debt financing.
Bond loans are
Hello readers. We had a lull at work for a couple of days.
There were few calls, we even managed to relax a little.
And then I receive a strange call.
The young man asks to tell us about bonded loans - what they are, what types there are, and clarified many other details in the process.
As it turned out later, it was a secret client who checked the quality of our work. I successfully passed the test and decided not to waste useful information! So now I’ll break it all down for you, friends. Happy reading.
Bond loan
Borrowers working in the real or financial sector actively use such an instrument as placement of securities on the financial market.
This type of mobilization of funds has many advantages over conventional bank loans, and what exactly can be found out in this article.
What is this
A bond loan is a loan that is issued in the form of the borrower issuing a bond.
A bond, in turn, is a security that confirms the right of its owner to receive from the party that issued it the face value of the bond or other property in equal quantities.
Transfer of money is carried out at the established security term. Bond loans have a number of advantages for the issuing party:
- the opportunity to receive an impressive amount of funds and implement large-scale investment projects without the risk of investors (who are security holders) intruding into the management of financial and economic activities;
- the possibility of accumulating funds allocated from private investors, as well as receiving financial resources from legal entities for a fairly long period of time and on favorable terms, taking into account the current economic situation in the financial market.
Advantages of a bond loan over a loan:
- a bond loan is cheaper;
- the terms for attracting investments exceed the terms for issuing a loan;
- no need to provide collateral;
- low degree of dependence on the lender, due to the involvement of a wide range of investors;
- the possibility of accumulating a significant amount of investment.
Species
To date, economists have identified three types of bond loans. The first type is a commercial bond loan, which is securities issued by organizations, corporations and other legal entities for further financial security own activities.
In practice, a commercial bond loan is a long-term loan instrument whose maturity may exceed one year.
A commercial bond loan can be provided without collateral, i.e. it presupposes the right to claim and does not involve collateral or guarantors.
Loans of this type are also common, which are secured by collateral - for example, some kind of property.
There are two more types of bond loans - state and municipal. IN in this case the borrower is the Russian Federation or one of its subjects, and the lender is citizens or legal entities. This type of loan obligation is voluntary.
The provision of state or municipal bond loans helps federal or regional authorities solve a number of important operational and long-term tasks.
Bonded loans are divided into several categories according to their terms: urgent, medium-term and long-term.
The term for the formation of a bonded loan depends on the required volume of preparatory activities and legal schemes for the issue and placement of securities, registration of guarantors, etc.
Medium-term bond loans have a maturity from one year to five years (notes). Such securities are considered coupon securities.
Interest is most often paid twice a year. The maturity of such securities can exceed five years and reach ten years.
Medium-term bond loans are in considerable demand among portfolio mutual investment funds.
This is explained by the wide coverage of debt maturities, as it is possible to achieve an optimal balance between short-term bonds (especially government bonds) and the high yield of long-term financial instruments.
Medium-term government bond issues are sometimes called notes.
Attention!
They are issued for a period of up to ten years and are coupon book-entry securities placed in issues.
IN Russian Federation The first type of medium-term government securities were federal loan bonds with a variable coupon (OFZ PC). Long-term bond loans have a maturity of up to twenty to thirty years.
Long-term government bonds are called bills. These are securities issued by the government with a maturity of five to thirty years.
In the USA, such securities are considered the most reliable, since the government acts as their guarantor. One more term can be given regarding long-term bonds – bond. It is also a security with a maturity of several years.
Government bonds are securities issued by the government of a state (accordingly, the state is the issuer of such bonds) for a specified period of time and with a certain yield on them.
This type of securities was typical for the Soviet Union, where bonds were issued not so much in financial terms, but in kind.
This is due to the fact that money was considered a relic of capitalism, and under communism the government was given other goals and objectives. Thus, sugar, grain and other loans were widespread in the country.
In general, government loan bonds by their nature are not much different from modern government bonds.
The only difference is that in many countries today such financial instruments are no longer used (this is especially true for countries in a difficult or changeable economic situation).
A municipal loan agreement is concluded through the purchase by the investor of issued municipal bonds or other securities that exercise the investor’s right to receive from the borrower the financial assets loaned to him and certain interest.
Municipal bonds are divided into two categories: general securities and targeted bonds. The first type is provided by the entire budget, or its share, as well as the issuing party’s own property.
Such bonds are not of a targeted investment nature and are aimed at filling the budget deficit and ensuring current tasks.
This type of securities has similar features to government short-term loans and is sold according to special established schemes. The interest of subjects in such a financial instrument is becoming more and more pronounced.
Targeted bond loans occupy a leading position in the number of issued securities.
Such bonds are issued for the implementation of a specific investment project and are repaid in most cases with the proceeds received.
Targeted municipal loans such as municipal housing loans are quite common. It looks like this: housing construction is carried out through the accumulation of funds from the population through the issuance of municipal securities.
The main objectives of this type of loan include:
- searching for new opportunities to improve the living conditions of citizens;
- improving mechanisms for long-term and reliable investment in housing construction;
- improving the quality of housing construction;
- reduction in construction costs and housing prices.
A commercial bond loan is a security that is issued by organizations, corporations and other legal entities for the purpose of further financial support for their own activities.
Commercial paper maturities vary and range from one year to longer.
Such a long-term financial instrument can be secured by collateral; sometimes such bonds are provided without collateral.
A domestic bond is a debt obligation in the form of a security issued to the domestic market.
Previously, domestic bond issues strictly complied with the methods of issuing such types of loans accepted in world practice.
The main distinguishing feature of the new securities is that they are not issued freely on the market, but are distributed among Russian companies - clients of Vnesheconombank.
External bonded bonds. According to the order of the Ministry of Finance of the Russian Federation dated September 11, 2013 No. 235 “On the issue of bonds of external bond loans of the Russian Federation,” the issue of this type of securities began in 2013.
The issue of external bonds is carried out within the maximum permissible limits government debt, designated by the Law on federal budget for 2013-2015 The Ministry of Finance acts as the issuer on behalf of Russia.
Such bonds are government securities and are issued in documentary form.
Attention!
Bonds of an external bond loan are subject to centralized storage. Their holders can receive the face value and accrued interest.
The total volume of the issue of such bonds is one and a half billion US dollars. Securities were issued in the amount of 7,500 units. The face value of one bond is two hundred thousand US dollars.
Potential holders of a financial instrument are citizens and legal entities, residents and non-residents.
Securities are placed in the form of a closed subscription and can be presented for early redemption in cases indicated by global certificates formalizing the issue of such bonds.
Advantages and Disadvantages
A bond loan as a tool for raising funds has a number of advantages:
- the ability to attract financial resources and implement large investment projects without the risk of interference by bondholders (investors) in the management of the enterprise;
- the issuer independently designates the parameters of the bond issue, namely: volume of issue, interest rates, terms, conditions of circulation and repayment, etc.;
- the possibility of accumulating financial resources provided by private investors and mobilizing financial resources of legal entities for a long period of time and on favorable terms;
- the optimal combination of the degree of profitability for investors and the amount of costs for the issuing party to issue and service the loan;
- improvement of mutual settlements, receivables structure and accounts payable issuing party.
Despite all the advantages of a bond loan, it should be borne in mind that this is a rather strict debt obligation.
When issuing bonds, the issuer is exposed to certain risks associated with the possible failure of this event.
Thus, the very fact of issuing a bond does not guarantee its placement on the terms specified by the issuer.
Source of funding
In developed countries, the role of bond loans as a source of financing investment projects is very large.
Over the last decade of the 20th century, in economically developed countries, more than 50% of private investment came from issuing bonds, while for issuing shares this figure was only 5%.
When issuing bonds, the rights and obligations of holders and issuers are described in detail, since regulations Most states do not fully regulate the procedure for issuing and placing such securities.
The main limiting factor when issuing bonds is the size of the property. Among the advantages of bonds as a source of financing are:
- the ability to attract a larger loan compared to a conventional loan;
- involvement of funds from both the banking sector and other financial market participants;
- attracting small creditors due to the low cost of bonds;
- possibility of extending repayment terms;
- in many countries it is allowed to attribute the costs of servicing bond issues to the cost of production, which allows reducing taxable profit;
- issuing bonds is cheaper than issuing shares;
- Bond loans are attractive to a certain group of investors due to their low risk.
Issue
The issue of a bond loan allows in the best possible way satisfy the medium- and long-term development plans of the enterprise and opens up new opportunities to attract financial resources on favorable terms.
The condition for issuing a bond issue is a special provision in the agreement on the issue of a security. There are positive and negative release conditions.
A positive condition requires certain actions, a negative condition limits them. The share of a bond issued in separate issues is called a tranche.
Placement and purchase
Bond issues are placed on the primary market, where securities are sold.
If securities are sold, they may be traded on the secondary market. The sale of bonds on the secondary market explains the main advantage of such securities - their liquidity.
In accordance with the current legislation of the Russian Federation, the initial placement of bond issues can last from three months to one year.
No more than a year should pass after the bond is registered with the Federal Financial Markets Service. In practice, the initial placement of a security is carried out within a few days. In order to buy a bond, you need to thoroughly understand the stock trading process.
The main volume of bonds is available on the Moscow Currency Exchange. To purchase a bond, you must register a brokerage account with access to the stock exchange.
Price
The cost of placing a bond issue depends on two factors: the credit history of the issuer and its creditworthiness.
The reduction in loan costs is facilitated by the development of the secondary bond market and increased investor confidence.
It turns out that a favorable credit history not only improves the issuer’s reputation, but also reduces the cost of providing loans in the future.
The cost of a bond loan is determined before taxes by calculating the internal rate of return (or income at the time of payment) from the financial flow of the bond.
Source: http://zaimexpert.ru/poleznye-materialy/obligacionnyj-zajm.html
Everything is for circulation!
It is no secret that any company at a certain stage of its development is faced with the need to attract additional funds.
Attention!
Let's say you need to purchase new equipment or need funds to replenish working capital. Very often, top management solves these problems through bank loans.
However, there are many other ways to raise money. One of the most promising, in our opinion, is the issue of bonds.
A bond (Latin obligatio - obligation) is an issue-grade security that secures the right of its owner to receive from the issuer of the bond its nominal value and income within the prescribed time frame.
In fact, this is an agreement under which one party undertakes to pay the other party the amount borrowed from it after a certain time, as well as pay interest on it as remuneration during the entire period of circulation of the bonds.
The frequency of interest accrual is set by the borrower himself, for example once a year or every six months.
The principal amount of the debt is called the par value of the bond, and the additional interest paid is called the coupon or discount.
Bonds vary:
- by issuers – state and corporate;
- by type of reward - discount, with a fixed coupon and with a floating coupon;
- by security – secured and unsecured;
- by repayment method - par value and convertible.
Let's imagine that you are issuing a bond with a par value of 1 thousand rubles. The circulation period is 5 years. The bond has a coupon rate of 10%, which is paid once a year.
There are many types of bonds depending on the method of repayment of the bond loan. For example, bonds can be placed at a discount to their face value.
The issuer sells the bond at a certain discount to the face value, and upon redemption, reimburses the investor for its full face value.
In this case, there are no coupon payments, and the investor's income is the difference obtained between the discounted bond price and the face value.
Another way to repay a bond loan is to distribute the entire principal amount over the entire life of the security. This allows you to reduce the debt burden in the last year of the bond's circulation.
Given that the principal amount decreases every year, the coupon size will also decrease.
One of the advantages of a bond loan is that the issuer, when excess funds appear, can redeem its bonds itself.
In this case, he may choose not to pay the coupon or repay the principal when he redeems the bonds he holds, thereby reducing the amount of his debt.
According to the law, the Government of the Russian Federation represented by the Ministry of Finance, the Central Bank of the Russian Federation, as well as any other company have the right to issue bonds.
The exception is pension funds, organizations engaged in investment management of pension assets, insurance companies, non-profit organizations and government agencies that are prohibited by law from making such releases.
The formation and development of the bond market in Kazakhstan was determined by many factors, primarily macroeconomic stabilization and economic growth.
In addition, the rapid growth of assets of such large institutional investors as commercial banks, pension and investment funds, insurance companies, ensured stable demand for bonds, mainly corporate, since this type provides good returns with an acceptable level of risk.
The growth in borrowing volumes through bond issues indicates the attractiveness of this form of financing for companies. First of all, this is due to the significant advantages of a bond loan. Let's list the main ones.
Borrowing conditions. The issuer of bonds independently determines the structure of the loan: the volume of the issue, the placement price, the interest rate (coupon), as well as the circulation period and the procedure for repaying the bonds.
In this case, financial advice on issues of issue and placement can be provided by a professional participant in the securities market.
Loan amount. The volume of funds raised is determined by the issuer himself in accordance with the required investments in the company, and the amount is limited only by the level of his solvency.
No collateral. A bonded loan, unlike a loan, does not require mandatory collateral.
However, some companies issue covered bonds, usually on their market debut, because the new issuer has neither a history of stock market borrowing nor a track record to match.
Fulfillment of obligations under such bonds is secured by a pledge of the issuer's property or a bank guarantee.
Relatively inexpensive borrowing. Unlike bank loans, interest rates on bonds are 3–4% lower. For example, on average the interest rate on bonds is 10–12% per annum.
Attention!
Tax benefits. In accordance with tax legislation, income from the increase in value when selling bonds on the trading floor must be excluded from the total annual income of a legal entity.
Attracting a wide range of investors. Public placement of bonds on the organized securities market makes it possible to attract a wide range of investors, which ensures the liquidity of the issuer's securities. In addition, there is no dependence on one lender.
Positive reputation of the issuer on the stock market. Public placement and redemption of bonds in accordance with the terms of the issue strengthens the company's image, is a guarantee of the success of the placement of subsequent issues of securities and contributes to increasing the investment attractiveness of the issuer in the eyes of investors.
Thus, the issuer can count on a reduction in the cost of raising funds in the future.
The above features of corporate bonds prove that their use is most effective for attracting long-term investments, creating a public reputation for the borrower and financing new projects.
Any company in the form of a joint stock company or limited liability partnership can issue bonds.
According to listing requirements, in order for securities to be admitted to the official list of the exchange, an issuer that is not financial institution, it is necessary to have a financial consultant - a professional participant in the securities market, who has a license to carry out brokerage and dealer activities in the securities market.
At its core, a financial advisor is an intermediary between the exchange and the issuer. So, at the initial stage it helps to determine the most optimal conditions loan, based on the financial performance and investment goals of the company.
Next, the financial consultant helps the issuer prepare the necessary documents for state registration bonds in the authorized government agency(bond issue prospectus) and listing of bonds on the stock exchange (investment memorandum).
The consultant can also act as an underwriter for the issue and, having experience in placing securities, help attract more investors.
Careful selection of a financial consultant determines the success of the placement of securities and is one of the most important stages in organizing a bond issue.
To summarize what has been said, it can be argued that a bond loan allows Russian companies a more flexible approach to the issue of raising funds and is one of the most attractive ways of borrowing.
Source: http://www.investkz.com/journals/52/504.html
Bond market
In accordance with Article 816 of the Civil Code of the Russian Federation, a bond is a security that certifies the right of its holder to receive from the person who issued the bond, within the period specified by it, the nominal value of the bond or other property equivalent.
The bond also provides its holder with the right to receive a fixed percentage of the nominal value of the bond or other property rights.
In accordance with paragraph 3 of Article 33 of the Federal Law “On Joint Stock Companies”, a bond certifies the right of its owner to demand repayment of the bond (payment of par value or par value and interest) within the established time frame.
In accordance with Article 2 of the Federal Law “On the Securities Market,” a bond is an issue-grade security that secures the right of its holder to receive from the issuer of the bond, within the period specified by it, its nominal value and the percentage of this value fixed in it or other property equivalent.
A bond may provide for other property rights of its holder, if this does not contradict the legislation of the Russian Federation.
The corporate bond market is actively developing. The main trend at the moment is a gradual increase in the terms and volumes of borrowing, as well as an increase in market liquidity.
The issue of a bond loan is the main alternative to credit in the medium- and long-term borrowing market, and it also successfully competes and gradually replaces borrowing methods using bill programs.
Advantages of bonded loans:
- creation of a public credit history, direct positive impact on the credit rating. Full and timely fulfillment of obligations under its bond issues will allow the subject of the Federation to attract funds in the future (including bank loans) on more favorable terms.
Main participants
As a rule, the current state of the issuer (for example, lack of market credit history) and market practice (investors prefer to see well-known companies with relevant experience as participants/organizers of a bond issue) forces the issuer to involve the following persons:
Underwriter– a professional participant in the securities market, whose main functions include ensuring the placement of the issuer’s bonds, that is, searching for investors.
The underwriters are usually banks and investment companies, that is, organizations that have a good and wealthy client base. Underwriters, on behalf of, on behalf of and at the expense of the issuer, sell bonds of the issue, for which they receive commissions/remuneration from the issuing company.
The amount of the underwriter's remuneration is established in the agreement that the parties (issuer and underwriter) enter into between themselves, and which, as a rule, amounts to a certain percentage of the volume of bonds placed by the underwriter.
To fulfill obligations under issued bonds, the issuer may also engage a paying agent ( banking structure, which will assume the obligation to transfer funds necessary for the payment of coupon income and redemption of bonds to the bank accounts specified by investors).
The function of the paying agent is technical: the issuer, on the established dates, transfers the required amount of funds to its account opened with the bank - the paying agent, and the bank, in turn, on the instructions of the issuer, within the established deadline for fulfilling obligations under the bonds of the issue, transfers funds to the accounts of the owners bonds.
Attention!
One of the underwriters (if it is a bank) can act as a paying agent. An exception is the placement of securities on an exchange - each exchange has its own paying agent.
Trade organizer– an exchange licensed by the Federal Financial Markets Service of Russia. Both the primary placement of bonds and their secondary trading can take place on the stock exchange.
It should be noted that the widely advertised advantage of a bonded loan (tax break) - the attribution of interest payments on a bonded loan to the cost of the company's products/services, applies only to bond issues traded on the stock exchange.
If for some reason the underwriter does not want to take on all the responsibilities associated with the legal side of the bond loan (drawing up issuance documents (decisions on the placement of bonds, decisions on the issue of securities, securities prospectus, etc.), support of state registration of this issue with an authorized government body, etc.), the issuer must engage a legal consultant or financial consultant who will assume these responsibilities.
It is difficult to analyze the practice of combining the functions of an underwriter and a legal consultant. On average 50% to 50%.
Preparation of documents is a technical function, but it is responsible (errors made in documents can have serious consequences for both the issuer and the underwriter) and time-consuming, therefore underwriters prefer to engage specialized consulting companies and coordinate issue documents with them.
Another person, as a rule, involved in organizing a bond issue is the registrar or depository, that is, the organization that records the rights under issued bonds.
If bonds are issued in book-entry form, then the register of owners of such bonds will be maintained by an independent registrar, or by the person responsible for maintaining the register of registered securities in the company (if there is no independent registrar).
If the issue is issued in documentary form, then the issuer, as a rule, prefers to issue the entire issue with one certificate and deposit it with the depositary (very rarely certificates are issued to the owners in order to avoid troubles with forgery and to have an idea of the structure of the issuer’s bond owners on reporting dates) .
Corporate bond market
In recent years, the corporate bond market has been the most dynamic and vibrant segment of the all-Russian financial market. It is extremely important for the economic development of the country to support the development of this sector.
The bond market faces a number of challenges. First of all, you need to decide the following:
- The market is devoid of price targets. Bond adjustments and their liquidity, as a rule, are determined spontaneously, under the influence of factors such as the size of the company, brand recognition and management. Financial stability and the risk of non-repayment are almost not taken into account due to lack of information and lack of information structure. And the first step towards the formation of such an infrastructure should be the formation of a system of national ratings;
- Many businesses are not ready for loans. Oddly enough, at the beginning of the 21st century, most potential borrowers do not have a clear business plan or confidence that investments will not only repay the debt, but also develop the business;
- market development is hampered by an emission tax (many countries do not have one) and an overly complex bureaucratic procedure for registering a bond issue.
The basis of the corporate bond market is issuing companies.
The market mechanism of interaction between the company and investors depends on the method of initial placement chosen by the issuing company.
Placement can take place in three ways:
- holding an auction for the sale of securities;
- direct placement of securities;
- placement of securities through investment banks.
In Russia, direct placement of auctions is common among financial institutions, since industrial companies do not independently enter the debt market.
Therefore, the option of issuing through the intermediary of investment banks is widely practiced. As a rule, they are both financial advisors and secondary market players who support the liquidity of the issue.
To place a bond issue, an issuing syndicate of several large banks is formed. The success of a bond placement depends not only on the underwriters or organizers of the issue, but also on the parameters of the bond issue.
The parameters include: the maturity of the loan on the market, the form of loan issuance, the size of the loan, the type of interest rate and the placement method.
The maturity of the bond on the market. In the Russian market, two circulation periods can be distinguished: the official circulation period (according to the bond issue prospectus0) and the circulation period taking into account the offer.
The offer is a purely Russian phenomenon, not common in the global corporate debt market. Since the fall of 2000, almost all market issues of corporate bonds with a circulation period of more than 1 year provide for an offer.
Until now, the offer remains a convenient tool not only for investors, but also for issuers. On the one hand, the offer helps the company issue medium-term securities and at the same time reduce the costs of debt refinancing.
On the other hand, offers are beneficial for investors, since the rates on them are similar to the rates on short-term securities, and the risks of investing in bonds with an offer are much lower.
At the same time, the offer mechanism significantly reduces the potential borrowing period and prevents the receipt of long-term production loans. Today there are offers with payments once a year, once every six months or more often.
Attention!
In terms of terms of circulation in the primary market, short-term securities (not more than 3 years) predominate, and they account for 70% of loans.
Bond issue form. According to the form of issue, loans are distinguished as discount or coupon, registered or bearer, documentary or uncertificated.
In Russia, coupon bonds in documentary form payable to bearer are more common.
Interest rate type In the case of a coupon bond issue by a company, the issuer considers the issue of coupon payments and types of interest rates. The rate can be of two types: variable and fixed.
The choice of interest rate in Russia is fraught with paradox. In conditions of high market risks, market participants, primarily issuers, prefer variable coupon payments.
These payments must be tied to a specific instrument that reflects the value of money in the market.
However, in Russia such an instrument does not exist, so both investors and issuers are content with their own preferences in choosing a certain level of market rates.
The market also uses a fixed rate. It is very beneficial to investors, allows them to predict their income, and is devoid of macroeconomic risks (although it does include the risk of changes in the financial situation of the borrower).
Practice shows that fixed-income securities are more liquid and are much more actively traded on the secondary exchange market than bonds with floating coupon payments.
The secondary market in Russia is developing at a faster rate than the primary market. The main indicators of secondary market growth are not only the total trading volumes, but also the number of transactions concluded and the number of securities traded.
According to experts, it is quite difficult to determine the real volumes of the over-the-counter market in Russia, so they can be estimated approximately. Over-the-counter trading is comparable to exchange trading volumes.
This means that the secondary bond market is quite large and will soon become highly liquid.
At the same time, investors get a real opportunity to choose a bond issue when making investment decisions. The market is growing every month, and the number of bonds traded on the market is also growing.
It is becoming increasingly difficult for investors to analyze the market, much less predict possible defaults.
Therefore, a new system for assessing the investment attractiveness of corporate securities is already being built on the market.
And the basis for this system were 4 criteria:
- Bond yield. Before an investor enters the corporate bond market, he compares the yields of different bond issues. Since trading is conducted daily and the yield to maturity also changes daily, the investor is forced to clearly monitor all market changes and the slightest fluctuations in yield.
- Reliability of the issuer company. Determining the reliability of an issuer is a rather labor-intensive process and can only be done by large professional organizations with a powerful staff of expert analysts.
- Liquidity of bond issue on the market. The low liquidity of a bond issue is one of the most significant risks. Now any investor runs the risk of losing his money due to the fact that at some point he will not be able to quickly convert invested funds into cash. There are two ways to minimize liquidity risk. The first is the creation of a highly liquid secondary market, the second is the placement of bond issues with offers. Both of these methods are actively used in Russia, but it is important to know that the first method is more acceptable for investors and issuers.
- Macroeconomic risks of investors. This category of risks is especially important for the corporate bond market. It takes into account both general market risks and risks for a specific bond issue. General risks arise from the close relationship between market conditions and macroeconomic indicators, and this close relationship is largely determined by investor behavior.
Advantages
- attracting significant amounts of funds for a long period of time;
- maneuvering when determining the characteristics of the issue: all parameters of the bond loan (volume of issue, interest rate, terms, conditions of circulation and repayment, etc.) are determined by the issuer independently;
- operational management of the structure and volume of the region’s debt, use of its bonds as a settlement instrument, optimization of mutual offsets;
- preferential tax regime;
- financial independence from one or more creditors due to the accumulation of funds from various categories of investors;
- favorable conditions for attracting funds due to long terms and taking into account the real economic situation and the state of the financial market;
- creation of a public credit history, direct positive impact on the credit rating.
Full and timely fulfillment of obligations under its bond issues will allow the subject of the Federation to attract funds in the future (including bank loans) on more favorable terms.
Enterprises that decide to use this type of financing should take into account the following features inherent in this instrument:
- complexity of the preparation procedure necessary documents and conducting an issue that requires the involvement of stock market specialists;
- the presence of a time interval from the decision to place corporate bonds to the actual receipt of money, about 4 months;
- the need to incur additional costs associated with the placement of bonds: pay for the services of underwriters, conduct presentations among investors, pay for the services of a registrar or depository and support the secondary market using the services of market makers (the total cost can be up to 1-2% of the issue volume);
- the need to disclose information about the company as much as possible at the stage of preparing the issue and during the circulation of the bond issue;
- the need to demonstrate break-even and sustainable development.
Contract for securing the fulfillment of obligations
Legislation of the Russian Federation ( Federal law“On the Securities Market” and “Standards for the Issue of Securities and Registration of Securities Prospectuses”) exempts the collateral from physically signing a security agreement with each owner of the bonds of the issue.
The fact of concluding such an agreement is the fact of purchasing the bond issue. The simplified scheme for concluding a contract established by law (based on the facts of offer and acceptance) is quite understandable and justified.
When placing bonds, the circle of purchasers can be large, and it will be necessary to spend a lot of time and effort on signing a security agreement with all purchasers.
In addition, when the owner of the bonds changes (for example, as a result of resale), the security agreement must actually be renegotiated, since one of the parties to the agreement changes.
When the bonds are resold, all rights arising from the security are transferred to the new owner.
However, the presence of a signed agreement between the issuer and the collateral is a prerequisite.
In practice, there have been cases when, after state registration of a bond issue, the collateral, wanting to increase its fee (another example of “business in Russian” in its purest form), tried to withdraw or suspend its obligations.
If by the time such “indecent” behavior of one of the participants in the bonded loan is revealed, the contract has been signed, the actions of the collateral can be attributed to a purely theatrical fiction.
He can terminate his obligations under such an agreement only in court.
Attention!
But if there is no such agreement (there were only oral agreements, and the collateral’s intentions were confirmed by the signing of the main issuance documents), then such behavior is fraught with very big problems for the issuer (the minimum of which is that the collateral will have to pay extra, the maximum is to look for a new collateral and register changes in the issuance documents). documents).
In conclusion, it can be noted that bonds are a financial instrument that the management of any company must keep in mind.
Even if today the issue of organizing a bond issue is too expensive for a company or is simply not relevant for certain reasons, in the future the situation may change, and attracting borrowed investments through the issuance and placement of bonds will become one of the main sources of business financing for the company.
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In the modern economic world coexist various types affordable lending. One of them is a bonded loan, which, when conducting a professional comparison, is many times more effective and profitable than other types.
In this article, we will consider what this type of borrowing is, who can act as each party, we will determine the main differences from loans from financial institutions, as well as the main pros and cons from the point of view of the source of financing.
What is
A bonded loan is a financial lending instrument available mainly to legal entities. This type of mechanism looks quite simple.
An organization or enterprise that needs an influx of financial resources from outside issues securities (in this case bonds), thereby attracting investors and receiving the necessary funds.
In this case, the main feature is the presence of mandatory information on the security itself:
- validity period of the document;
- price;
- information about the issuer, etc.
A bonded loan not only ensures quick receipt of funds in the shortest possible time, but also implies the possibility of obtaining a certain profit for the investor.
This is done through:
| Making certain payments | Most often, the issuing company pays the promised percentage twice a year. For example, with the promised 5% of the cost of securities purchased in the amount of 100,000 rubles, the investor will receive 2,500 rubles 2 times during the current year (5% = 5,000 rubles). Bonds with this form of interest payments are called coupon bonds, and the income itself is called coupons. |
| Difference between purchase price and redemption value | in some cases, in order to attract investors, the issuing company offers to buy a bond cheaper than it undertakes to pay for it at the end of the security’s validity period. This difference is called a discount, and this type of income is called a discount |
Thus, it represents a financial loan, the remuneration for which is provided in the form of a certain income for the investor.
What are the types?
Despite the fact that the concept of a bond loan is not widespread among ordinary Russians, legal entities and government agencies use this financial instrument constantly.
For the convenience of both parties, there are various types of such loans.
Let's consider the main classification:
| By type of issuer | are divided into:
Based on the name of each loan participant, it is clear who needs borrowed funds. The main condition for any issue of securities, including bonds, is strict compliance with the requirements of Russian legislation, regardless of who the issuer is, state or private finance company. The bulk of investors choose securities, focusing specifically on the issuer and its rating in the world of finance. As an example, we can cite well-known companies such as VTB24 or Rostelecom, whose bonds are in high demand on stock exchanges |
| By application period | bonds are divided into:
|
| According to the terms of the repurchase | there are:
|
Video: investments. Bond loan
Difference from bank loan
Borrowing in general is significantly different from bank loans, and in the case of a bond loan, several important differences can be distinguished:
| No obligation to provide collateral | When issuing bonds, the reputation of the organization and its rating in the financial world play such a role |
| Duration of validity | some loans have a term of 5 to 30 years, which significantly exceeds the terms of bank loans (except mortgages) |
| Low interest rate | the interest rate on bond loans is significantly lower than on bank loans and is set by the issuer itself (no bank or private lender will be able to provide such a service to the client) |
| Lack of serious dependence on the lender | if there are many investors, the applicant does not feel as constrained as if there is an agreement with a specific banking institution |
| Sum | the issue of securities under certain conditions can guarantee the client an influx of really large sums of money, which without appropriate collateral is almost impossible when collaborating with banks |
Government bond loan
The governments of many countries, as well as private organizations, need an influx of financial resources. This is mainly due to the implementation of any investment projects that are attractive from a financial point of view.
In the Russian Federation, existing federal bonded loans have the status of state borrowing.
In addition to the implementation of large government projects, funds from government bonded loans can be raised for the following purposes:
Municipal type
Municipal bond issues represent the issue of securities by individual representatives of the country (regions, regions, municipalities, districts, etc.). A distinctive feature is the mandatory repayment guarantee.
In the Russian Federation, when issuing municipal bonds, such a guarantee is municipal property.
That is, in the event of its financial insolvency and inability to repay issued and sold bonds, the municipality will have to put up individual real estate objects for auction to pay off debts.
The goals that municipalities pursue when issuing bonds are the same as in the case of government bonds, only on a smaller scale. Therefore, the profitability from them is almost on the same level as government ones.
An important feature of a municipal loan in the Russian Federation is that the investor’s coupon income on such securities is not taxed.
Commercial
Commercial loans are one of the instruments for financing legal entities. Naturally, small and medium-sized businesses do not issue bonds to attract investors' funds, for which the preparation of a bond issue and subsequent loan servicing will become an unbearable financial burden. Bond loans are affordable only for large companies and corporations.
The main purposes of using such borrowing are:
- replenishment of working capital deficit;
- financing an attractive investment project;
- carrying out modernization;
- refinancing existing debt;
- development of a new direction of activity.
It is important to understand that in most cases, the use of a bonded loan is much more profitable for companies than the use of credit funds.
The bank's interest rate is fixed and non-negotiable, and when issuing bonds, a legal entity has the opportunity to independently set the amount of remuneration for investors.
Domestic
- these are all bonds issued on the territory of one state, regardless of their form, type of issuer, etc.
Bonds issued for domestic use invite domestic investors to invest their capital in Russian enterprises, municipalities or financial support from the state itself.
External
External bond loans, so-called Eurobonds or Eurobonds, are the issue of securities in foreign currencies aimed at the international financial market.
They have the goal of attracting foreign capital to implement investment projects on a national scale (for example, the construction of international pipelines, etc.).
Eurobonds can be issued in any currency (euro, dollar, yen, yuan, pound, franc, etc.). The prefix “euro” only indicates the international nature of such a financial instrument.
An external bond loan is a form of international lending and, depending on the purpose of use, can be:
As a source of financing
Bond loans are inherently important sources financing. Unlike other securities (for example, shares) issued within the country, bonds are more popular and account for more than 50% of all private investments.
The use not just to attract a certain amount of money, but as a permanent source of financing for an enterprise or an entire state, is due to the fact that:
Release conditions
No enterprise or government department begins issuing bonds without first assessing financial prospects, possible risks and determining dynamics.
Most often, the launch of a bond issue determines the need and planning of medium- and long-term financial projects issuer.
Also, one of the prerequisites for the event is the presence of recognition of the company or corporation. The issue of securities by an unknown enterprise will lead to financial collapse, since the bonds will not be popular on the country's stock market.
If there are positive prospects for issuing bonds and a certain “weight” in the financial market, a company, a municipality or the state itself can begin issuing securities.
Placement and purchase
The main trading platform for the sale of securities in general and bonds in particular are stock and financial exchanges. The placement of securities and their subsequent sale is carried out by the organizer of the issue.
Bonds can be sold both on the primary and secondary financial markets.
It is important to remember that every citizen of the country can purchase bonds of Russian enterprises, municipalities or the state itself.
The only condition for a profitable investment equity is the presence of financial knowledge. In their absence, a broker is hired who, for a fee, evaluates the financial performance of securities available on the market and purchases them for you.
What does the cost depend on?
Despite the fact that the value of each bond is determined by the issuer independently, the formation of the par value is influenced by:
Negative points
With all its undeniable advantages, there is also a downside. Let us define some negative aspects of this type of borrowing:
| Increased complexity of the procedure | in addition to strict adherence to Russian legislation, the issuer is required to conclude and sign many agreements with mandatory participants of the bond issue (depository, issue organizers, representatives stock exchange for subsequent sale of bonds, etc.) |
| Inability to plan time costs | In reality, the hired organizer is responsible for issuing securities and introducing them to the country's stock market. As a result, the borrower-issuer does not have the opportunity to influence the course of this process |
| Financial costs | If we consider the costs of issuing securities in relation to a bank loan, then the latter clearly benefit. When applying for a loan, the client’s costs are determined only by the amount of interest required to be paid. The issue of bonds will require additional expenses in the amount of 2-3% of the total value of securities |
What are the benefits for the issuer
From the point of view of financial analysts, they have a number of competitive advantages not only for investors, but also for the issuer itself.
Let's define the main ones:
| No risk of outside interference in the process of enterprise management or its activities | the purchase of bonds guarantees the investor the right to return the invested funds and receive a certain reward in cash or in kind. But this does not give any rights to interfere in internal management. |
| Ability to independently determine parameters | in all other borrowing options, the client “plays on someone else’s field,” that is, the terms of the transaction are dictated by the lender. In the case of bonds, the issuer independently determines the basic conditions (interest rate, number of securities to be issued, maturity date, etc.) |
| The optimal combination of the degree of profitability for investors and the issuer’s costs for issuance and maintenance | There are certain statistics showing that the feasibility of issuing bonds is present in the case of a total amount of 200-300 million rubles. If the state or enterprise has the required annual profit (about 2.5 billion rubles), then the efficiency of the bond issue will tend to 100%. |
| Possibility of financial accumulation of funds received from the sale of bonds | Due to the duration of loans (except for term bonds), the issuing enterprise has a good opportunity to “save” a sufficient amount of money on favorable terms for a fairly long period |
Today, the lending market is overflowing with new offers from microfinance companies. It is worth noting that the popularity of such a product as a bond loan has in no way decreased.
Dear readers! The article talks about typical ways to resolve legal issues, but each case is individual. If you want to know how solve exactly your problem- contact a consultant:
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The first thing that stands out about this type of lending is that it has excellent conditions for obtaining, and it is also extremely profitable for both the borrower and the lender. Let's take a closer look at this type of financing.
What is it
A bond loan is an operation of issuing certain documents by the borrower. But based on these documents, their owner has the right to demand a certain amount of money. In fact, such a document is a security, which must contain information about the duration of the loan and other information.
The process of issuing paper and its subsequent circulation is necessarily carried out on the basis of valid legislation.
Violation of the rules is not allowed, since the person responsible may be punished. It is important to remember that the process of issuing paper is carried out through the stock exchange.
These types of loans may be subject to the following requirements:
- Annual payments are less than total accounting profit for the year;
- The presence of an investment product, which involves spending funds received during the sale;
- Net assets are greater than the amount of authorized capital.
Species
There are three types:
- State;
- Commercial;
- Municipal.
All these categories are formed and released into circulation according to the norms established by law. Initial placement takes up to a year. It is important that no more than a year has passed since the registration of these securities with the Federal Financial Markets Service.
All of the listed types of securities can be purchased on stock exchanges.
To acquire obligations of this format, it is necessary to thoroughly study the procedure for carrying out trading operations. In each situation, the process of assessing value is purely individual.
By date
- Long-term;
- Medium term;
- Urgent;
Nuances:
- There are term bonds in circulation;
- These papers are considered valid for a year;
- Non-profit organizations of various types can act as issuers;
- For the most part, such bonds can be sold to increase funds in circulation.
Medium term
The period for repayment of debt obligations for this category of bonds can be up to 5 years. Portfolio mutual funds have the greatest interest in these securities.
Long-term
These types of bond documents can be issued either by the state or by large corporations with authorized capital huge sizes.
It is worth remembering that the debt repayment period ranges from 15 to 30 years. These types of bonds are the most conservative and reliable, since the state acts as a guarantor for their payment.
Video: Features
Government bond loans
Nowadays, government bonds are special securities that have a certain value. The main purpose of such documents is to attract free money that is available to legal entities and the rest of the population. Funds can be used for social or community needs.
Bonds of this format have obligations of the state itself according to the payment of value upon expiration of the validity period.
In addition, the owner of such securities may exercise the right to receive certain interest. In fact, this type of lending is a reliable source of stable income. Such securities are very similar to ordinary shares.
True, there are still certain differences between them:
- This document has a larger range of release types;
- A bond must have a specific expiration date.
These papers are divided into categories such as:
- Commercial;
- Municipal;
- Internal.
Municipal
This category of bonds refers to credit obligations that are issued by local governments in order to attract money to solve certain problems in the regional economy.
Such papers can be divided into categories such as:
- Targeted. Bonds can be issued for a specific project. At the same time, debt repayment can be carried out according to the profit received.
- General coverage. This category of municipal bonds is provided by the general budget of the region or a certain part of it. In most cases, release is associated with budget shortfalls. And this is how the authorities can achieve its replenishment.
Commercial
Very often, authorities at different levels can act as initiators of the creation of a particular commercial enterprise.
Quite often in such a situation there is not enough money, and therefore there is a need to issue such securities. By selling them, local authorities have the opportunity to attract additional finance for the implementation of certain projects.
Domestic
It is rare to find such a document on free sale, because these papers are distributed strictly among specific enterprises. In this way, the issuer can immediately solve two main problems:
- Get a good credit history;
- Improve your reputation.
External bonded bonds
At the present time in Russia, the process of placing foreign bond issues on international stock markets is less common. This is how big money can be attracted to the state economy. The placement process itself is carried out by banking consortia.
One of the key parameters of such lending is the absence of taxation.
This point is very important, since it is regulated by current legislation.
Advantages and Disadvantages
As for the positive and negative aspects of such sources of profitability, they are mandatory.
Among the advantages it is worth noting the following:
- The ability to mobilize large sums for the implementation of certain projects of any scale without major costs;
- Possibility of changing the features of the bond - the issuer can exercise this right until the securities are put into circulation;
- The possibility of accumulating significant amounts thanks to private entrepreneurs and organizations for a long period of time;
- Ensuring an ideal ratio of expenses and income;
- Optimization of accounts receivable, mutual settlements and creditor debts.
However, among the shortcomings you can see only one:
- Severity of commitment. The issuer is exposed to risks. In any situation, there is a possibility that the bonds will not be successful, because the issue does not act as a guarantor of placement on the terms that were developed by the issuer.
Bond loan as a source of financing
In those conditions in which an organization or state needs to search for a certain amount of money to solve a certain problem or to quickly solve complex financial problems, issuing this type of paper is almost the most optimal solution. This type of problem solving has many advantages. For these reasons, this measure is used quite often.
Prices and emissions
The issuance process is the issuance of documents that confirm obligations of this nature. This process is implemented by current legislation. It should be understood that the pricing policy here can only be formed by the issuer itself. The issuer must be confident that all obligations can actually be fulfilled.
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