Corporate Debt (Debt) Flashcards
What were the very first bonds issued?
Bearer bonds
What does the paying agent do?
Handles the actual payment to the owners of record and handles debt redemptions.
What is a trust indenture?
Spells out the interest rate, maturity, collateral, call or put provisions, and all other relevant features of the bonds.
Explain the trust indenture act of 1939.
All corporate issues of $50,000,000 or more must have a Trust Indenture.
Long-term corporate debt is also referred to as?
“Funded” debt since the issuer has use of the funds for a long time before repayment is due.
What is secured corporate debt?
Specific collateral is pledged to back the bond issue. Therefore, if the corporation defaults, the bondholders have claim to the collateral.
What are the types of secured corporate bonds?
Mortgage bonds, collateral trust bonds, and equipment trust certificates (ETCs).
Explain mortgage bonds.
Bonds backed by real estate owned by the corporation.
Explain collateral trust bonds.
Backed by another company’s securities (stock or bond) held in trust by the corporation. Common for a parent company to use a subsidiary company stock as the collateral.
Explain equipment trust certificates (ETCs)
Backed by the equipment used by the corporation (typically a common carrier company). Serial maturity is used to counteract the deprecation in collateral value over time.
