BFC2340 Study Guide - Final Guide: Callable Bond, Subordinated Debt, Unsecured Debt

• School: Monash University
• Department: Business - BFC
• Course: BFC2340
• Professor: Philip Gharghori

Document Summary

Seniority of debt in a corporation"s capital structure: Issuers of corporate debt are categorised into three sectors; Utilities = investor owned companies involved in the generation, transmission and distribution of electricity, gas and water. Financials = bonds of the wide range of financial institutions. Industrials = companies that are not utilities or financials. Capital structure of a firm = the way the firm"s management finances itself. Consists of common stock, preferred stock and debt. Debt that is backed or secured by some form of collateral beyond the issuer"s general credit standing. Issuers will pledge stocks, notes, bonds or whatever other kind of obligations they own. Bonds secured by such assets are called collateral trust bonds: senior unsecured debt. Debt that is not secured by a specific pledge of property. However, creditors holding this type of debt still have a claim on the property of issuers or their earnings.