The bonds are certificates that are issued to obtain resources; these indicate that the company borrows a certain amount of money and agrees to pay it at a future date with an established amount of interest previously, and in a certain period.
General Characteristics of the Bonds:
When the company makes a bond issue, it must take into account the following aspects:
· Conversion Characteristics
This allows the creditor to convert the bonds into a certain number of common shares. The creditor converts your bonus only if the market price of the share exceeds the conversion price. This feature is considered attractive by the issuer and buyer of corporate bonds.
· Purchase Option
The purchase option is included in almost all bond issues; this gives the issuer the opportunity to amortize the bonds at an established price when due. Sometimes the amortization price varies with time, decreasing at different times defined in advance.
The amortization price is set above the nominal value of the bond to offer some compensation to the holders of the redeemable bonds before their maturity. Generally, the purchase option is advantageous for the issuer since it allows you to collect the outstanding debt before it expires. When interest rates fall, an issuer can request for redemption of a current bond and make another issue of a new bond at a lower interest rate, therefore when interest rates are raised the amortization privilege cannot be exercised, except to meet the requirements of the amortization fund.
In order to sell an amortizable bond, the issuer must pay a higher interest rate than that of non-amortizable issues of equal risk. The purchase option is useful to force the conversion of convertible bonds when the conversion price of the security is below the market price. Ameripro Surety can also help you to sell your bonds with the utmost efficiency.