BU397 Chapter Notes - Chapter 14: Book Value, Underwriting, Unsecured Debt
Document Summary
Obligations which are not payable within one year: or one business operating cycle, what ever is longer. Often has restrictive covenants attached: these are terms and conditions. Bond issue may be sold through: an investment banker (who acts as a selling agent on the market) or. Firm underwriting: underwrite the entire issue by guaranteeing a certain sum to the corporation (who initially wanted to sell the bonds) Takes on the risk of selling the bonds for whatever price the agent can get. Best efforts underwriting: may sell the bond issue for a commission that will be deducted from the proceeds of the sale, by private placement. When a company sells a bond directly to large institution with out the aid of an underwriter. Requires repayment of principle at a future date and period it interest payments. Different from bonds because they don"t normally trade on public markets.
