Bonds

How to issue bonds ?
• usually, approval by board of directors and general meeting of
shareholders necessary; authorized:
number of bonds
total face value and nominal interest rate
• face value: amount of principal the issuer must repay at maturity
• nominal interest rate determines amount of cash interest the issuer
has to pay (also stated rate of interest)
bonds are taken by investment banks („underwriters“) and sold to
the public
underwriters buy bonds for resale or on a commission basis
bondholders are represented by a trustee, typically a large bank
contract between company and bank is called bond indenture
specifies terms of the bond, rights, privileges, and limitations of
bondholders
• bondholders receive bond certificates as evidence of the
company‘s debt to the bondholder; bondholders are creditors !
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