Bonds
What are Bonds?
A Bond is a debt security where the issuer borrows funds from the bondholder for a specified period, with a fixed interest rate. The company or government entity promises to repay the principal at maturity. Bonds are commonly used by businesses to raise capital without diluting ownership.
What are the Benefits of Bonds?
Non-dilutive financing
Bonds allow companies to raise capital without diluting ownership.
Stable financing cost
Fixed interest payments can help businesses plan for the future and manage cash flow.
Investor confidence
Bonds are attractive to conservative investors who want a predictable return.
Why Set Up Bonds?
Raise capital without equity dilution
Companies can raise significant capital without giving up ownership.
Predictable payments
The company can budget for bond interest payments, as they are fixed.Attract institutional investors
Bonds can be attractive to institutional investors seeking steady returns with relatively low risk.How to Set Up Bonds
Determine the bond amount and interest rate
Establish how much capital is needed and the rate at which it will be paid back.Set the conversion conditions
Bonds typically have a fixed maturity date when the principal will be repaid in full.Structure the bond
Choose whether it will be secured or unsecured, and establish any covenants or conditions.
Examples of Companies Using Bonds
Apple
Apple is known for issuing bonds to raise capital for purposes like stock buybacks and infrastructure investment.
Tesla