Raising Capital with a Bond Offering

Have you ever been turned down by a bank for a commercial loan? Why not consider launching a private bond offering that will provide principal protection to your investors? 

A private placement bond issued with principal protection typically offers investors 100% principal protection, if held to maturity and the issuer is able to fulfill its obligation. 

When this type of bond is issued with principal protection, a certain percentage of the principal is used to purchase a zero-coupon bond with a maturity matching that of the bond, which matures to the value of the original principal. 

Hiring a capital markets consultant, like Frank Nagy Financial Services will greatly reduce the burden of setting up your principal protected bond offering. As part of our services, we will help you structure the right bond offering and make the appropriate introductions with the proper service providers that will best suit your fund raising needs.

After each investor purchases your bond, your company will then purchase a zero-coupon note which will provide a level of principal protection to your investor. 

Because the notes remain in place throughout the term of your bond, it is considered a static hedge.

The remaining funds are then used by your company to make a leveraged investment in your project, trading portfolios or other risky opportunities utilizing credit lines, standby letters of credit, or margin.

Principal protected bonds are considered safe investments, as bond investors enjoy the security of not only the issuer but also the underlying zero-coupon notes. 

In addition, these bonds enable companies with poor creditworthiness to issue debt when they otherwise might not be able to do so. 

Parties and documents involved in a Principal Protected Bond Offering:

· Company/Issuer, that’s you

· Paying and Escrow Agent - The paying agent is primarily responsible for the interest payments to bondholders as well as handling bond subscriptions and opening the bank account.

· Lawyers - The lawyer usually takes responsibility for reviewing or preparing the offering documentation and transaction issues.

· Offering Circular – This document describes your bond offering to your investors.

Contact us to learn more about raising capital through a principal protected bond offering.