Chapter 19 - Business Borrowing: Corporate Bonds, Asset-Backed Securities, Bank Loans, and Other
Forms of Business Debt
A number of factors are considered in pricing a new corporate bond issue.
first is the credit ratings assigned by Moody’s, Standard & Poor’s Corporation, Fitch
Ratings, or other rating agencies.
Another factor is the “forward calendar” of security
offerings, which lists new issues expected to come to market during the next few weeks.
Obviously, if a heavy volume of new offerings is anticipated in the near-term, prices will
decline unless additional demand appears.
Changes in government policy must be
anticipated because that policy can have profound effects on security prices.
factors considered by investment bankers include the size of the issue, how aggressive
other bidders are likely to be, and the strength of the “book,” which consists of
indications of advance investor interest in the security being offered.
10. Explain what is meant by a
. Who purchases privately placed
corporate bonds and why?
What are the principal
to a business borrower from offering debt in
the private placement market? Can you see any