**TI82** TxtView file generated by CalcText - Kouri ù chap 24ù ÷ ÿChap24Corpo debt = Leveraged Buyout (LBO) When a group of private investors purchase all the equity of a public corporation and finances the purchase primarily with debt Public debt= The Prospectus A public bond issue is similar to a stock issue. Indenture Included in a prospectus, it is a formal contract between a bond issuer and a trust company. The trust company represents the bondholders and makes sure that the terms of the indenture are enforced. In the case of default, the trust company represents the interests of the bond holders. Corporate bonds almost always pay coupons semiannually, although a few corporations have issued zero-coupon bonds. Most corporate bonds have maturities of 30 years or less The face value or principal amount of a bond is denominated in standard increments, most often $1000. The face value does not always correspond to the actual money raised because of underwriting fees and/or if the bond is issued at a discount. Original Issue Discount Bond Describes a bond that is issued at a discount Types of Corporate Debt= 1)Unsecured Debt A type of corporate debt that, in the event of bankruptcy, gives bondholders a claim to only the assets of the firm that are not already pledged as collateral on other debt 2)Notes A type of unsecured corporate debt Notes typically are coupon bonds with maturities shorter than 10 years. 3)Debentures A type of unsecured corporate debt Debentures typically have longer maturities than notes. 4)Secured Debt A type of corporate debt in which specific assets are pledged as collateral. 5)Mortgage Bonds A type of secured corporate debt Real property is pledged as collateral that bondholders have a direct claim to in the event of bankruptcy. All classes of securities are paid from the same cash flow source. 6)Asset-Backed Bonds A type of secured corporate debt Specific assets are pledged as collateral that bondholders have a direct claim to in the event of bankruptcy. Can be secured by any kind of asset 7)Tranches Different classes of securities that comprise a single bond issue All classes of securities are paid from the same cash flow source. Seniority A bondholder’s priority in claiming assets not already securing other debt Most debenture issues contain clauses restricting the company from issuing new debt with equal or higher priority than existing debt. Subordinated Debentures Debt that, in the event of a default, has a lower priority claim to the firm’s assets than other outstanding debt Bonds market 1)International Bonds Domestic Bonds Bonds issued by a local entity and traded in a local market, but purchased by foreigners They are denominated in the local currency. Foreign Bonds Bonds issued by a foreign company in a local market and intended for local investors They are denominated in the local currency Private Debt Debt that is not publicly traded Has the advantage that it avoids the cost of registration but has the disadvantage of being illiquid ÿç9