Chapter 9

Corporate Bonds
A bond defined as a long term debt of a firm or a government set forth in
writing and made under seal.
Kinds of Bond
 Government bonds
 Corporate bonds
Bonds as distinguished from stocks
Alternative ways of bond issuance
 Public offering
 Private placement
Classes of Bonds
 By type of security
 By manner of participation in earnings
 By method of retirement or repayment
By type of security
 Earnings and general unpledged assets of issuing company(debentures)
 Earnings of issuing company plus pledge of specific property
(mortgage bonds)
Real estate mortgages (senior and junior liens)
Closed-end issues
Open-end issues
Chattel mortgages
 All or some of original security plus general credit of another company
Assumed Bonds
Guaranteed Bonds
 Combined earnings of allied companies plus collateral protection in
some cases(joint bonds)
By method of participation in earnings
 Fixed contractual interest rate
Coupon bonds
Registered bonds
 Fixed contractual rate with payment contingent upon earnings(income
bonds)
 Fixed contractual rate with participating feature
Participating Bonds
Convertible Bonds
Bonds with warrants
Bonds with Junior Security Attached
By Method of retirement
 Repayment of principal on periodic basis
 Bonds with possibility of advance retirement
 Repayment of full principal on set date
 No set maturity date

Serial bonds
Sinking Fund bonds
Callable bonds
Convertible bonds
Perpetual bond
Indenture
A contract between the corporation and the trustee on behalf of the
bondholders.
Trustee
A person who handles monies or property on behalf of another in a trust.