Corporate Bond in China资料.pdfVIP

Company name Corporate Bond in China 中国证券业协会 Definition of Corporate Bond A type of bond issued by a corporation. The bond holder receives interest payments (yield) and the principal is repaid on a fixed maturity date. Corporate Bond is one of the major financing methods frequently adopted by corporations, besides equity financing and bank loan financing. Debt and Equity Financing Differences – Equity financing allows a company to acquire funds without incurring debt. On the other hand, issuing a bond does increase the debt burden of the bond issuer . – Stock purchaser gain ownership of the business In addition, equity holders have claims on the future earnings of the firm. In contrast, bondholders do not gain ownership in the firm. Characteristics of Bonds Advantages of bonds – Bonds are debt, not equity, so the ownership and control of the company are not diluted. – Tax-deductible in interest expense. – The low interest rates on bonds allow for positive financial leverage. – Advantages of a corporation – Simple to become an owner – Easy to transfer ownership – Provides limited liability Disadvantages of bonds: – Risk of bankruptcy; the debt must be paid back reg ularly, or creditors will force legal action. – Negative impact on cash flows. Types of Corporate Bond According to whether registered: – Registered bond (记名公司债券) vs. Bearer bond (不记名公司债券) According to whether holders participate in profit sharing: – Participating bond (参与分红债券) vs. Non-participating bond (不 参与分红债券) According to whether callable: – Callable bond (可提前赎回公司债券) vs. Non-callable bond (不可提 前赎回公司债券) According to whether secured: – Se