Corporate Bond Issue deals with the issuance of Corporate Bonds.
The Corporate Bonds are debt securities, which are issued by public and private corporations.
The Bonds are issued in the primary markets. The issue of bonds is usually done through underwriting. Underwriting is a popular process for issuing bonds. In this process, one or more banks or securities firms form a syndicate and purchase the whole issue of bond from the issuer and sell to the investors. Government Bonds are usually auctioned.
The Corporate Bond issuers can be categorized into five main types:
- Conglomerates
- Financial Services Companies
- Industrial Corporations
- Public Utilities
- Transportation Companies
The issuers may be either U.S. Companies or Foreign Companies. Foreign Governments frequently issue Corporate Bonds in the U.S. Bond Markets.
The Corporate Bonds are mainly issued in three forms:
Registered Bonds: This kind of Corporate Bond is issued in the form of certificates. The owner's name is printed on it. For payment of interest, no coupons are attached that the owner can submit. The agent or trustee of the issuer sends the interest to the bondholder at proper intervals. They also forward the principal amount to the bondholder at time of maturity.
Bearer Bonds: No names are printed on this type of Bonds. The coupons are attached to it. The Bearer Bonds are almost cash equivalent. Bearer Bonds are highly negotiable and anonymous. The Tax Reform Act, 1982, has stopped the issue of this type of Bonds; still a large number stays in circulation.
Book-Entry Bonds: These Bonds do not have any certificates. Just like Bearer Bonds have been largely replaced by Registered Bonds, Book-Entry Bonds are replacing certificates as the common form of issue. In case of Book-Entry Bonds, there is only one master or global certificate and this is maintained at a securities depository. In case of a Book-Entry Bond, the ownership is recorded in the brokerage account of the investor. The payments of principal and interest are deposited to the brokerage account.
Most of the Corporate Bonds are traded in the Over-The-Counter Market (OTC). Generally, the minimum investment for OTC Bonds is $5,000. The denomination of listed bonds is $1,000.
