BOND ISSUE

PROCESS
WHAT ARE BONDS ???

I OWE YOU

A bond is a formalcontractto repay borrowed

money with interest at fixed intervals.

An investor agrees loan money company/

govt. in exchange for a predetermined interest
rate
 TYPES OF
TYPES OF BOND MARKET
BONDS

DOMESTIC

FOREIGN

EUROBONDS
 DOMESTIC BONDS
Fixed interest with fixed maturity claims

Issued domestic entities domestic currency

sold to domestic investor

Accompanied by PROSPECTUS

Arms length relationship

 FOREIGN BOND
Currency other than domestic currency

Non-resident borrowers

Can be swapped or converted

Foreign currency bond price

 EUROBOND
Issued for sale outside of the issuers home currency

Can be issued in the currency of foreign country or

another currency

Interest payments & principal returned

currency in which bond issued

Underwritten by international syndicate

 Bidding &
Awarding

Listing Syndication

Documentation Bought deal

BOND ISSUE
PROCESS

Launching,
offering
Role of &closing
IPMA

Offer period
Closing
phase
BIDDING & AWARDING
MANDATE
Issuer fulfil various formalities
Bids called from interested banks/merchant bankers

Evaluation scrutinized on various financial parameters

Issuer shortlists some bidders

Negotiations held with lead managers final decision taken

Other formalities taken up

 SYNDICATION
Initiates action
He enters into a
Lead manager (syndicate of
discussion with underwriters, appoint
key member
issuer selling agents , finalize
banking arrangements)

Prepare Ensure a fair

Prospectus representation
 BOUGHT DEAL
Introduced in US markets in 1979

Issue pre-priced by lead manager

Issuer knows issue price & coupon

rate before hand
LAUNCHING OF THE ISSUE

Launching advertised
through various Invitations sent
media

Underwriters
become
responsible
FLOATATION OF THE
ISSUE
Lead manager tries to gauge
the support

Issue likely to command in

the market

Pricing is determined
 OFFER PERIOD
Lead manager organizes sales campaign
explains merits to investors encourages them

Offer document outlining various issues is

circulated to the investors encourages them to invest
CLOSING PHASE
Advertisement indicating closure of
transaction
Proceedings of payments from various
parties

Commission to clearing house

Delivery of notes & bonds to the
investors
 ROLE OF IPMA
Self-regulatory body

Stipulates & ensures adoption of common

standards of professional behaviour

Lays down various guidelines

Costs for bond issue floatation framed

 DOCUMENTATION
SUBSCRIPTION
PROSPECTUS
AGREEMENT

PAYING AGENCY
THE TRUSTEE DEED
AGREEMENT

UNDERWTITING & THE LISTING

SELLING AGREEMENT
AGREEMENT
DEED

BIBLE
 LISTING
Bond issue to be listed at 1 or more stock
exchanges

Euro/international bonds listed at LONDON &

LUXEMBOURG
 ROLE OF
MERCHANT BANKS
 IN A NUTSHELL
A bond sale is essentially finding parties who desire to loan
the company money

Merchant banks locate parties interested in purchasing bonds

from their clients

Additional services
Formation of appropriate bond interest rates
Determination of the duration of the bond
identification of potential collateral owned by the company
which can back the bond
 MERCHANT BANKERS AS
UNDERWRITERS
An underwriter is a securities dealer who helps government entities
bring bond issues to market. The key role it plays is to buy the bonds
from the issuer and then resell them to investors. In doing so it
assumes a financial risk and thus expects to make a profit on the
transaction.

Recent Examples
State-run carrier Air India Ltd. has sought bids from merchant
bankers to underwrite a bond sale to raise 74 billion rupees
Reliance Industries is looking to raise up to $500 million by selling
bonds to foreign investors Reliance is said to have appointed
Citigroup , HSBC and Barclays capital as the merchant bankers to the
offering.
 CREDITS
RITVIZA LEELA - 01
VASISHT GOPALKA - 17
ANKUSH JAIN - 19
KAUSHIK JAIN - 25
PRANOTI PURO - 37
ASHWINI SHAH - 47
THANK YOU