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6.2   Review the legal aspects of bond financing and bond

Question : 6.2   Review the legal aspects of bond financing and bond : 1415061

 

6.2   Review the legal aspects of bond financing and bond cost.

1) Coupon interest rate on a bond represents the percentage of the bond's par value that will be paid annually, typically in two equal semiannual payments, as interest.

2) Restrictive covenants are contractual clauses in long-term debt agreements that place certain operating and financial constraints on the borrower.

3) Standard debt provisions specify certain record keeping and general business practices that must be ensured by the bond issuer.

4) A trustee is a paid party representing the bond issuer in the bond indenture.

5) Restrictive covenants, coupled with standard debt provisions, help the lender to monitor the borrower's activities to ensure efficient use of funds.

6) The restrictive debt covenant that imposes fixed assets is to guarantee fixed-payment obligations by maintaining a specified level of fixed assets.

7) In a bond indenture, subordination is the stipulation that subsequent creditors agree to wait until all claims of the senior debt are satisfied.

8) The bond indenture identifies any collateral pledged against a bond and specifies how it is to be maintained.

9) To carry out systematic retirement of bonds, a corporation makes semiannual or annual payments that are used to retire bonds by purchasing them in the marketplace.

10) Subordination means that subsequent creditors agree to wait until all claims of the senior debt are satisfied.

 

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