Corporate Bond Issue

Corporate bonds, supplied in primary markets, are debt securities, which are issued by public and private corporations.

Underwriting, a popular process through which bonds are usually issued, occurs when one or more banks or securities firms form a syndicate, and purchase the entire bond issue from the issuer and sell to the investors. Government bond, on the other hand, are usually auctioned. Corporate Bond issuers can be categorized into five main types:

Conglomerates
Financial Services Companies
ndustrial Corporations
Public Utilities
Transportation Companies

The issuers may be either US or foreign companies; foreign governments frequently supply corporate bonds in the US markets. 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 these bonds are traded in the Over-The-Counter Market (OTC). Generally, while the denomination of listed bonds is $1,000, the minimum investment for OTC Bonds is $5,000.