International Bond-What is International Bond?
International bonds are a government, financial institutions, industrial and commercial enterprises or national organizations for the mobilization and intermediation of funds in foreign financial markets, issued to foreign currency denominated bonds.
The important feature of international bonds is the issuer and investors belonging to different countries, to raise funds from foreign financial markets.
International bond issuance and trading, can be used to balance the issuing country's international balance of payments, can also be used for distribution of funds into government or business engaged in the development and production.
In accordance with the currency and the issuance of bonds issued in different locations, international bonds can be divided into foreign bonds and Eurobonds.
International bond issues - the specific characteristics of
International bonds are a kind of cross-border bond issues involving two or more countries, compared with domestic bond has a certain particularity.
1, funding sources, Canton International bond issues in international stock market fund-raising, distribution targeted at investors in many countries, and therefore its source of funding is much broader than the domestic debt, through the issuance of international bonds, the issuer can make a flexible and adequate for their construction projects and other needs funding.
2, issue large-scale Issuance of international bonds, are generally large scale, it is because of this debt borrowed one of the purposes is to utilize the breadth of international stock market sources of funding and adequacy. Also, because the issuer to enter the international bond market to be from the international credit rating agencies bond credit grading, only the high credibility of the issuer in order to successfully carry out fund-raising, so in the issuer's credit conditions have been fully affirmed the circumstances, a huge debt is possible.
3, there are exchange rate risk The issuance of domestic bonds, raising and debt service funds are the national currency, so there is no exchange rate risk. Issuance of international bonds to raise money is in foreign currencies, exchange rate fluctuations in the event, issuers and investors are likely to suffer accidental loss or to obtain windfall profits, therefore, very important part of the international bond risk is exchange rate risk.
4, there is protection of national sovereignty In the international bond market to raise funds, and sometimes can be a sovereign national government's commitment to ensure that the final payment, if such a commitment to be guaranteed in all international bond market are willing to open to sovereign states, which also makes the international bond market has a higher security. Of course, on behalf of state sovereignty, the Government must own the issuer of the bond market, borrowing in the international inspection and control.
5, in order to measure the currency freely convertible currency as a International bond issuance in international markets, so the quote currency is often an international common currency, a surge in U.S. dollars, pound sterling, deutsche mark, Japanese yen and Swiss franc-based, so that the issuer to raise capital can be an universal free foreign exchange funds.
International bond issues - the major categories International bond issues from different angles and can be divided into different categories, which are optional major categories are presented below.
(1) foreign bonds and Eurobonds.
A. refers to the borrower in foreign bonds in their own country other than the one issued in order to release the country where the currency denominated bonds. Foreign bonds is the traditional international financial markets business, has existed for centuries, its distribution must be approved by issuing country where the Government's approval and subject to the jurisdiction of the country's financial laws. Foreign bonds issued in the United States (USD) is called Yankee bonds; of foreign bonds issued in Japan (yen) is called Samurai bonds. B. European bonds. European bonds in the bond borrower countries face currency other than the State or in the country's offshore international financial markets bonds. European bonds are European money market, one of three main business, so it's issued without any jurisdiction of the country's financial laws.
(2) The public offering of bonds and private placement bonds.
A. public offering bonds to the community bonds issued by the general public can be publicly traded in the Stock Exchange. Public offering bonds must be internationally recognized credit rating agency's rating, the borrower must own the case made public.
B. private placement bonds, privately to a limited number of investors bonds. This bond issuance amount of smaller, short duration and can not be listed publicly traded, and the coupon rate on the high side; but the issue price low, to protect the interests of investors. Private placement bonds, flexible, generally without credit rating agency ratings, does not require the issuer to own situation made public, the more simple procedures for the issuance.
(3) General bonds may be against the shares of bonds and notes attached to stock options.
A. General bonds, is based on the general debt service bonds issued by way of bonds, including those commonly referred to government bonds, financial bonds and corporate bonds, it is relative to bonds versus stocks, bonds and other debt attached to stock options new varieties for the purposes of the latter two kinds of bonds, known as "equity-linked bonds."
B. may be against the shares of bonds, refers to the stock can be converted into corporate bonds. When the bonds are issued, give investors a right, that investors over a certain period of time, the right to vote for bond denominated corporate bonds will be converted into shares of the enterprise to become corporate shareholders enjoy the treatment of stock dividends. Issuing such bonds are mostly large enterprises, the international bond markets in recent years against the shares of corporate bonds can be developed very rapidly.
C. Warrant Attached bonds, is able to obtain loans to buy company shares the rights of corporate bonds. Once investors have purchased these bonds, in which the enterprises to increase, that is the priority to buy its shares, but also access to the original issue price by the stock purchase discounts. Issuance of such bonds are mostly large enterprises.
(4) The fixed-rate bonds, floating rate bonds and interest-free bonds.
A. fixed-rate bonds, is the issuance of bonds when the coupon will be fixed rate bonds.
B. floating-rate bonds, is the bond coupon rate based on changes in interest rates and changes in the international market bonds. Such bonds and floating duration of the benchmark interest rate also generally refer to the London Interbank Offered Rate. Floating rate notes is 80 years since the international bond market, developed a new financial instruments. Issuing such bonds have a certain interest rate risk, but if the trend of significantly lower international interest rates float, or the borrower of funds in the future to do the same duration of the use of floating interest rate, interest rate risk, you can credit.
C. non-interest bearing bonds, was referring to coupon bonds. When this bond issue is based on less than the face value of tickets sold for face value tickets to recover by maturity, issue price and face value ticket price difference is the proceeds of investors. Issuing such bonds to the borrower, the coupon can save printing costs, thereby reducing financing costs; for investors who can get more than a coupon bond interest.
(5) a dual-currency bonds and the European Currency Unit bond.
A. dual currency bonds, and is involved in two kinds of currency bonds. The bonds are issued interest-bearing when the adoption of a currency, but the payback time to pay in another currency, the exchange rate between two currencies to issue bonds when identified by the. The biggest advantage of issuing such bonds can be prevented and to avoid foreign exchange earning money and borrowing the currency exchange rate risk arising from inconsistencies.
B. The European currency unit bonds, based on ECU-denominated bonds, the value of relatively stable in recent years, such bonds in the Eurobond market share increased every year.
International bonds - distribution method The main mode of international bond issue are as follows:
(1) public offering. This is the general public to the community bonds can be publicly traded in the Stock Exchange. Public offering bonds must be internationally recognized credit rating agency ratings. Borrowers need to own all of the public. Every time borrowers issuing bonds, to be re-established a credit level.
(2) private placement. It refers to a limited number of private investors to the bonds issued. The amount of this bond is shorter than the duration of filial piety can not be listed publicly traded. However, private placement bonds, flexible, generally does not require credit rating agencies, rating, and do not release their situation will be made public, the more simple procedures for the issuance.
In addition, the distribution methods can also be divided into:
(1) Direct release. By the people themselves come forward to release the issuance of bonds issued by the issuer all the procedures for its own account and do the pre-release preparation, and selling bonds directly to investors, the remaining bonds are also handled by themselves. In the bond issuer may also issue before the stipulated period of time the recipient's application, according to the number of printed applications for bonds, and direct distribution, this can prevent excess bonds.
(2) Indirect distribution. Entrusted by the issuer intermediary agency to issue bonds, is also divided into raising and underwriting commission to raise. Delegate is to entrust to raise sales group to sell bonds, sell bonds could not finish processing returned to the issuer. Acquisition raised by the acquisition group marketing, marketing could not finish by the buyer who bought the bonds. In the international bond market, generally have adopted a way to issue bonds to raise purchase.
