{"id":7164,"date":"2020-09-29T12:55:30","date_gmt":"2020-09-29T09:55:30","guid":{"rendered":"https:\/\/redgatecapital.eu\/?page_id=7164"},"modified":"2023-05-15T16:31:29","modified_gmt":"2023-05-15T13:31:29","slug":"corporate-bonds","status":"publish","type":"page","link":"https:\/\/redgatecapital.eu\/en\/for-companies\/capital-raising\/corporate-bonds\/","title":{"rendered":"Corporate bonds"},"content":{"rendered":"\n\t<section class=\"section\" id=\"section_436594196\">\n\t\t<div class=\"section-bg fill\" >\n\t\t\t\t\t\t\t\t\t\n\t\t\t\n\n\t\t<\/div>\n\n\t\t\n\n\t\t<div class=\"section-content relative\">\n\t\t\t\n<div class=\"row row-large\"  id=\"row-57958779\">\n\n\t<div id=\"col-1261471903\" class=\"col medium-6 small-12 large-6\"  >\n\t\t\t\t<div class=\"col-inner\"  >\n\t\t\t\n\t\t\t\n<h5>CAPITAL RAISING<\/h5>\n<h1>Corporate bonds<\/h1>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\n\t\n\n\t<div id=\"col-1593167548\" class=\"col medium-6 small-12 large-6\"  >\n\t\t\t\t<div class=\"col-inner\"  >\n\t\t\t\n\t\t\t\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\n\t\n\n<style>\n#row-57958779 > .col > .col-inner {\n  padding: 145px 0px 60px 0px;\n}\n<\/style>\n<\/div>\n\t\t<\/div>\n\n\t\t\n<style>\n#section_436594196 {\n  padding-top: 0px;\n  padding-bottom: 0px;\n  background-color: rgb(251, 235, 211);\n}\n<\/style>\n\t<\/section>\n\t\n\n\t<section class=\"section\" id=\"section_1503378944\">\n\t\t<div class=\"section-bg fill\" >\n\t\t\t\t\t\t\t\t\t\n\t\t\t\n\n\t\t<\/div>\n\n\t\t\n\n\t\t<div class=\"section-content relative\">\n\t\t\t\n<div class=\"row\"  id=\"row-331399163\">\n\n\t<div id=\"col-961849013\" class=\"col medium-12 small-12 large-8\"  >\n\t\t\t\t<div class=\"col-inner\"  >\n\t\t\t\n\t\t\t\n<p class=\"lead\">A bond is a security, which obliges the issuer of the bond to pay the received loan sum back to the investor at maturity with interest. Bonds are issued by governments, municipalities as well as corporations. In Estonia, only corporate bonds are issued; in Latvia and Lithuania, also government bonds.<\/p>\n<p>The owner of the bond gives a company, municipality or state a loan. Thereby, a bond is a loan investment. Similarly to other creditors, the bondholder aims to earn interest on the loan and get back principal payments by previously agreed deadlines according to the terms of the bond. Generally, regular interest is paid on bonds, but the invested principal is paid back to the investor on the bond redemption date. A bond interest rate may be fixed or floating. Usually, the contract foresees the investor receiving regular interest payments, ordinarily several times a year, throughout the period until the bonds are redeemed.<\/p>\n<h3>Advantages of bonds for companies<\/h3>\n<p>Companies issue bonds in order to raise capital as an alternative to a bank loan. Baltic companies fund their operations with bonds mainly for four reasons. Firstly, bonds provide more discretion and flexible conditions. Secondly, bonds offer the possibility of a longer redemption date. Thirdly, bonds are suitable for funding capital-intense long-term projects. Fourthly, bonds increase brand recognition.<\/p>\n<h3>Categorisation of bonds<\/h3>\n<p><strong>Based on issuer.<\/strong> Bonds are categorised on the basis of different parameters, and one category is based on issuer. The issuer may be the government, its agency, a local municipality or a corporation. Government bonds usually have a \u00a0redemption period of three months to thirty years. Such securities are issued by the government of a country. Their risk level is usually low, but it depends on the country\u2019s credit rating. Government bonds are categorised by maturity:<br \/>\u2022 short-term (treasury bills) \u2013 maturity up to 1 year<br \/>\u2022 medium length (treasury notes) \u2013 maturity up to 7 years<br \/>\u2022 long-term (treasury bonds) \u2013 maturity up to 30 years, but there are also perpetual bonds with no maturity<\/p>\n<p>A local municipality may issue municipal bonds, usually with interest rates above the same country\u2019s government issued bond yield. Corporate bonds usually carry a higher interest than government bonds, as they come with higher risk.<\/p>\n<p><strong>Based on security.<\/strong> Bonds are also divided into bonds with and without security. Bonds without security include commercial papers and other short-term commitments, issued by companies with strong credit rating and trusted by investors. In case of a secured bond, assets are pledged, which provides investors additional confidence they can realise the claim.<\/p>\n<p><strong>Based on expiration.<\/strong> Bonds are also categorised as callable bonds, puttable bonds and convertible bonds. In essence, these additional terms are similar to those of options. For example, callable bonds give the issuer the right to buy back bonds at a suitable time. The puttable bondholder has the obligation to sell the bond back to the issuer on a certain date before the redemption date. \u00a0Convertible bonds give the owner the right to exchange the bond for the issuer\u2019s shares, if such an option has been prescribed in the bond terms and conditions. Therefore, documentation analysis is extremely important before investing.<\/p>\n<h3>Bonds suit investors with lower risk appetite<\/h3>\n<p>Bonds are suitable for investors with low risk appetite, interested in stable and consistent interest income. Compared to shares, the risk and return of a successful company\u2019s bonds is lower. For example, in case of the company\u2019s bankruptcy, bondholders are paid their part before shareholders. Unlike shares, a bond does not give the holder the right to decide over how the issuer does business.<\/p>\n<h3>Risks<\/h3>\n<p>Bonds are suitable for balancing an investment portfolio in case of sudden fluctuations in share prices. On the other hand, there are practically risk-free bonds but also ones with higher risk \u2013 risk and return go hand in hand. Generally, the main risks are the company\u2019s solvency and interest rate risk.<\/p>\n<p>In case of insolvency, the risk arises that the issuer experiences financial difficulties and is unable to pay the bondholders interest on time and in promised amounts. It may also happen that bonds cannot be redeemed on time and in agreed volume by maturity. In such a case, the bondholder may lose the invested capital in part or in full. Therefore, the investor has to run a thorough analysis of the issuer before purchasing bonds.<\/p>\n<p>In case of\u00a0 an interest rate risk, overall change in interest rates on capital markets may affect the market price of the bond. The market price of fixed-income bonds goes down when general interest rates go up, but rises when interest rates decline.<\/p>\n<h3>Baltic bond market<\/h3>\n<p>The local bond market has picked up in recent years. Companies have become more aware of bonds. This is reinforced by the fact that in addition to securities traded on the stock exchange, also an OTC bond market has emerged, which exceeds the bond volumes traded on the stock market.<\/p>\n<p>Investors\u2019 interest in local investment opportunities is confirmed by frequent oversubscriptions. Public offering of securities or preparing a listing particulars take quite a bit of time, but it opens the door to new investor groups like retail investors or institutional investors, who cannot make investments outside the exchange due to regulatory reasons. Subject to stock market requirements, public companies are more transparent and reliable for investors.<br \/>A suitable springboard to take a company to the stock exchange main list is the alternative market First North. This is a way to increase the company\u2019s transparency and create a secondary market for securities. The requirements for trading are simpler and drawing up listing particulars is not obligatory.<br \/>Nasdaq Baltic regulated securities\u2019 list includes Admiral Markets, Inbank and LHV Group bonds and from the First North\u2019s list, Mainor \u00dclemiste and Magnetic MRO bonds.<\/p>\n<p>The majority of Baltic bond issues are non-public and directed at select parties. The transaction structure is flexible, it takes into account the company\u2019s needs and investors\u2019 expectations. When it comes to non-public issue, then it is worth mentioning Creditstar, Endover Kinnisvara, Nortal and PlusPlus Capital.<\/p>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\n\t\n\n<style>\n#row-331399163 > .col > .col-inner {\n  padding: 45px 0px 0px 0px;\n}\n@media (min-width:550px) {\n  #row-331399163 > .col > .col-inner {\n    padding: 90px 0px 0px 0px;\n  }\n}\n<\/style>\n<\/div>\n\t\t<\/div>\n\n\t\t\n<style>\n#section_1503378944 {\n  padding-top: 0px;\n  padding-bottom: 0px;\n}\n<\/style>\n\t<\/section>\n\t\n\n\t<section class=\"section\" id=\"section_1956409440\">\n\t\t<div class=\"section-bg fill\" >\n\t\t\t\t\t\t\t\t\t\n\t\t\t\n\n\t\t<\/div>\n\n\t\t\n\n\t\t<div class=\"section-content relative\">\n\t\t\t\n<div class=\"row\"  id=\"row-1453055105\">\n\n\t<div id=\"col-850476019\" class=\"col small-12 large-12\"  >\n\t\t\t\t<div class=\"col-inner\"  >\n\t\t\t\n\t\t\t\n<h2>More like this<\/h2>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\n\t\n\n<style>\n#row-1453055105 > .col > .col-inner {\n  padding: 45px 0px 0px 0px;\n}\n@media (min-width:550px) {\n  #row-1453055105 > .col > .col-inner {\n    padding: 90px 0px 50px 0px;\n  }\n}\n<\/style>\n<\/div>\n<div class=\"row\"  id=\"row-1198816679\">\n\n\t<div id=\"col-2023392849\" class=\"col medium-4 small-12 large-4\"  >\n\t\t\t\t<div class=\"col-inner\"  >\n\t\t\t\n\t\t\t\n<p class=\"subtitle\">Capital raising<\/p>\n<h4><a href=\"\/en\/for-companies\/capital-raising\/corporate-loans\/\">Corporate loans<\/a><\/h4>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\n\t\n\n\t<div id=\"col-587229828\" class=\"col medium-4 small-12 large-4\"  >\n\t\t\t\t<div class=\"col-inner\"  >\n\t\t\t\n\t\t\t\n<p class=\"subtitle\">Capital raising<\/p>\n<h4><a href=\"\/en\/for-companies\/capital-raising\/mezzanine\/\">Mezzanine<\/a><\/h4>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\n\t\n\n\t<div id=\"col-1780728600\" class=\"col medium-4 small-12 large-4\"  >\n\t\t\t\t<div class=\"col-inner\"  >\n\t\t\t\n\t\t\t\n<p class=\"subtitle\">Capital raising<\/p>\n<h4><a href=\"\/en\/for-companies\/capital-raising\/shares\/\">Shares<\/a><\/h4>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\n\t\n<\/div>\n<div class=\"row\"  id=\"row-266900049\">\n\n\t<div id=\"col-768829981\" class=\"col small-12 large-12\"  >\n\t\t\t\t<div class=\"col-inner\"  >\n\t\t\t\n\t\t\t\n<a href=\"\/en\/for-companies\/capital-raising\" class=\"button primary is-link arrow-animation\" >\n\t\n\t<span>Back to Capital raising<\/span>\n\n\t<img loading=\"lazy\" decoding=\"async\" src=\"\/wp-content\/themes\/redgate\/assets\/images\/Redgate-arrow.png\" class=\"button-arrow\" width=\"33\" height=\"8\" alt=\"Button arrow\"><\/a>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\n\t\n\n<style>\n#row-266900049 > .col > .col-inner {\n  padding: 0px 0px 0px 0px;\n}\n@media (min-width:550px) {\n  #row-266900049 > .col > .col-inner {\n    padding: 90px 0px 50px 0px;\n  }\n}\n<\/style>\n<\/div>\n\t\t<\/div>\n\n\t\t\n<style>\n#section_1956409440 {\n  padding-top: 0px;\n  padding-bottom: 0px;\n  background-color: rgb(251, 235, 211);\n}\n<\/style>\n\t<\/section>\n\t\n","protected":false},"excerpt":{"rendered":"","protected":false},"author":1,"featured_media":0,"parent":7142,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"page-blank.php","meta":{"_acf_changed":false,"footnotes":""},"class_list":["post-7164","page","type-page","status-publish","hentry"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.4 - 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