Corporate bond, corporate bond (called. Corporate bond) – debt security, issued by the company pursuant to the provisions of the Act on Bonds 29.06.1995.
Corporate bonds may have a paper or intangible form (in the form of records kept by KDPW SA, a bank or a brokerage house).
Corporate bonds are associated with a higher degree of risk than other types of bonds.
The reasons for issuing bonds by enterprises:
- resulting from the investment needs, the need for additional funds for a period of more than one year,
- the possibility of obtaining a cheaper source of financing compared to the issue of shares.
Types of corporate bonds:
Due to the method of collateral, corporate bonds are divided into:
- secured – the issue of bonds is secured, eg by other bonds, mortgage collateral,
- unsecured (corporate debenture bond) – bond issue is not secured. Unsecured bonds are issued primarily by large enterprises with stable financial standing and high ratings.
- junk (corporate junk bond ) – corporate bonds issued in order to buy out failing companies. They are characterized by a lack of asset collateral and a higher interest rate. Most often, they can be exchanged for company shares.
Due to the method of interest, corporate bonds are divided into:
- fixed-rate bonds – a type of fixed-income securities, where the interest is determined from the beginning and the redemption value is equal to the nominal value of the bonds,
- floating rate bonds (indexed bonds) – type of variable income securities, where the value of interest and buyback is increased by the inflation level of a given parameter (eg WIBOR),
- zero-coupon bonds (discount bonds) – after the redemption period, the issuer pays the bond buyers the amount equal to the nominal value of the bonds. The sale price of zero-coupon bonds is lower than the nominal price.
Due to the privileges, corporate bonds are divided into:
- variable – with the possibility of exchanging bonds for company shares,
- with a warrant – the buyer has the right to purchase the shares of the company which is the issuer of the bonds at a predetermined rate.