Bond loans: medium-term, long-term, state. Issue of bonds

Subjects operating in the real or financial economic sector often enter the bond market. Here they use a special tool for mobilizing money, which has a number of significant advantages. Let's consider in detail what bond loans are.

General information

A bond is a security. It confirms the right of the owner to receive funds or property from the issuing entity.

A bond is a security that establishes a specific period for the transfer of money. The subject, who needs a loan, issues a certain number of them. It is called the issuer. Loan bonds allow:

1. Get a significant amount of financial resources.
2. To implement large-scale investment projects. In this case, the intrusion of bondholders in the management of financial and economic activities is excluded.
3. Accumulate the money sent from private investors.
4. Get financial resources from organizations for a sufficiently long period on good terms, taking into account the state in which the financial market is located.

Advantages over traditional loans

Entering the bond market gives a lot of positive results. First of all, the loan will be more profitable from the economic point of view. Bond loans are always cheaper than conventional loans. A significant difference is also in terms of attracting investments. They exceed the period of granting a loan.

It is also important that the subject does not need to provide bond loans with collateral. The person interested in the loan is practically independent of the creditor. This is due to the involvement of a large number of investors. The subject as a result has the opportunity to accumulate a significant amount of investment. Bond loans not only allow the interested person to declare themselves, but also:

1. Contribute to the formation of a positive credit history. If the entity properly fulfills its obligations, investors will subsequently demand a minimum payment of their risks.
2. Allows you to reduce the cost of emissions in the presence of competition between investors for the opportunity to participate in the transaction.
3. It gives an opportunity to distribute risks. A wide range of investors excludes dependence on any of them. This means, in turn, that there is no risk of losing control of the company.

Another advantage that is worth noting is the amount of the loan. The minimum amount of emission should be 200-300 million rubles. A young company is unlikely to receive such a loan. Loan repayment can be carried out within 3-5 years.

Classification

At present, economists allocate corporate bonds. They are issued, respectively, organizations, companies, other legal entities. This tool is used for subsequent financial support of the enterprise. Corporate bonds can be provided without collateral. This means that if there is a right of claim, there is no need to attract guarantors or collateral.

The period during which the loan is repaid may be more than a year. There are two more types of instruments in question. One of them is state loans. In this case, the issuer is the Russian Federation. The investor, respectively, can be a legal entity or citizens. State loans are used to solve some operational problems, the implementation of large-scale prospective projects. This kind of loan is voluntary. There are also municipal loans. Here, the issuer will act as any administrative-territorial unit of the country. Accordingly, this tool is used by the regional authorities to address key issues at the level of a particular entity.

Coupon Bonds

Loans are also classified depending on the period of provision. The term of the loan will depend on various circumstances. For example, the necessary amount of legal schemes and preparatory measures for issuance and placement, the design of a guarantee, etc., have a value. The medium-term bond loan is formed for a period of 1 to 5 years. Interest on it, as a rule, are paid twice a year. To provide the loan, the interested entity issues so-called coupon bonds. The period of their circulation can exceed 5 and reach 10 years. Such loans are popular with unit investment funds.

The current situation is conditioned by a long period of debt coverage. Within the set time period, an optimal balance is achieved between short-term loans and a significant return on financial instruments used for a long time. Sometimes such loans are called notes. Coupon bonds are uncertificated. They are posted by issues.

Long-term bonded loan

The term of circulation of such loans is 20-30 years. Long-term government bonds are called promissory notes. In the US they are considered the most reliable. This is due to the fact that the guarantor for them is the government. Long-term bonds are also called bonds. They have an extended period of treatment.

Federal loans

Bonded government loans are issued by the government of the country. Accordingly, it acts as an issuer. In this case, the issue is carried out for a specific period, and a certain yield is established. Such papers were distributed in the USSR. During the Soviet period, the issue was not so much financial as in kind. This position is explained by the fact that at that time money was considered a survivor of capitalism, and in the communist period the government faced other tasks and goals. As a result, grain, sugar and other loans were widely distributed in the USSR. Currently, such financial instruments are almost not used. They are especially unpopular in countries with a volatile or difficult economic situation.

Municipal loans

The loan agreement is concluded through the acquisition by the investor of bonds issued or other securities that allow the right to receive from the debtor the financial resources granted to him on loan and the established interest.

Municipal loans can be of two types. The first are the bonds of general coverage. They are provided by the entire budget or a part thereof, as well as by the issuer's own property. Such securities do not have a targeted investment character. They are aimed at covering the budget deficit and are used to solve current problems. Such loans have related features with short-term government loans. Their implementation is carried out by specially created and well-established schemes.

Currently, experts note the increased interest of subjects to this financial instrument. The second type is targeted loans, which today occupy leading positions in the number of issued bonds. They are issued for the implementation of a specific investment project. Loan repayment is made from the received profit.

The most common at present are municipal targeted housing loans. Construction is carried out by concentrating the population's funds through the issuance of securities. The main tasks of this issue are:

1. Searching for opportunities to improve the quality of people's living conditions.
2. Perfection of mechanisms of perspective and reliable investment in construction.
3. Improve the quality of work.
4. Reducing the cost of construction and housing.

Other types of loans

Domestic loans are debt obligations in the form of bonds issued in circulation on the territory of the country. Earlier they strictly corresponded to the methods of emission accepted for such types of loans in world practice. In Russia, the issue of domestic bonds began, which were distributed among domestic companies.

The emission of external liabilities is carried out in the maximum permissible amount of public debt. Its value is defined in the Law on the Federal Budget. These government bonds are issued in a documentary form. They are designed for centralized storage. The holder can receive the value of the bond and the interest accrued. The total volume of the issue is $ 1.5 billion. The nominal value of the bond is $ 200,000. Citizens and legal entities act as potential holders. At the same time, they can be both residents and non-residents of the country. Bonds are placed by private subscription and may be presented for early repayment, if it is indicated by global certificates, which formulate their issue.

Release Features

The bond issue ensures maximum satisfaction of the enterprise development plans for different periods, opening up new opportunities for attracting financial instruments on favorable terms. This is due to the increasing recognition of the organization and, accordingly, attracting the interest of investors.

The condition for issuing a bond is a special provision in an agreement on issue. Debts are subject to certain requirements:

1. The optimal amount of the loan should be more than 200 million rubles.
2. The amount of the issuer's net assets must exceed the amount of its authorized capital.
3. The enterprise must have a real project, for which the received investments will be directed.
4. The annual payments for the loan must correspond to or be less than the amount of accounting profit for the same period prior to the transfer of mandatory payments to the budget.

Placement and acquisition

Bonds are issued in circulation on the primary market. Here they are realized. If they are sold, they can be released to the secondary market. This realization explains their key advantage - liquidity. Under the current legislation, the initial placement of loans can be from 3 months. Up to a year. After registration, it should not take more than 1 year. In practice, the initial placement takes several days. To purchase a bond, you need to study the entire trading system in the financial market. Their main volume is available on the Moscow Currency Exchange. Bonds of banks circulate on stock exchanges. Among them there can be both commercial and state institutions. For example, you can buy bonds of Sberbank. This financial organization carries out the issuance of debt obligations, conducts certain operations on them, ensuring an increase in the revenue parts of the budgets of different regions, and, accordingly, participating in the economic development of the country.

Buy bonds Sberbank can be in any of its offices or through the official website. However, experts recommend that you study the quotes before buying. The essence of investing is to buy as cheap as possible, then to sell at the highest possible price. You can sell bonds only after a certain time period, which is indicated in them. In this regard, the potential investor should be able to calculate the profitability of the loan. The issue of bonds by Sberbank is usually carried out for 1-5 years. With the correct calculation, the holder can receive a fairly solid profit.

It should be remembered that Sberbank is an institution in which more than 50% of the capital is supported by the government. As practice shows, the capitalization indicators are increasing every year. In addition, the amount of capital and the return on loans and credits are constantly growing. This, in turn, provides an increase in the bank reserve, which allows the organization to issue and place bonds.

Price

The cost of placing the loan is established in accordance with two factors. It depends on the credit history and solvency of the issuer. Reducing the price of the loan is facilitated by the expansion of secondary sites and increased investor confidence.

A positive credit history not only forms a good reputation of the issuer, but also ensures a reduction in the cost of providing loans in the future. The cost of the loan is determined before taxation by calculating the internal rate of return (or income at the time of payment) from the financial proceeds of the bond.

Loan as a means of raising funds

A bond loan allows the issuer to independently designate its parameters. In particular, we are talking about the volume of output, interest rates, terms and period of treatment, and so on. Bonds contribute to the improvement of the system of mutual settlements, development of the structure of the issuer's creditor and accounts receivable. Meanwhile, despite the obvious advantages of this fund-raising tool, it should be remembered that such loans act as fairly tough promissory notes. Issuing bonds, the interested subject exposes himself to certain risks. First of all, they are connected with the likely failure of this whole event. Therefore, the very fact of the issue of securities does not yet guarantee their placement on terms indicated by the issuer.

Loan as a source of financing

This role of the bond loan in developed countries is quite large. During the last 10 years of the 20th century, more than half of private investments accounted for the issue of such obligations, and the share issue was within 5%. Before the placement of bonds, the obligations and rights of interested persons, holders including, are specified in sufficient detail. This need is conditioned by the absence in the regulatory legal acts of most of the countries of a complete list of regulations governing the procedure for their release and sale. As the key limiting factor in the placement of bonds is the amount of ownership. The merits of this tool as a source of funding include:

1. The possibility of raising funds from different investors. They can be including banks.
2. Opportunity to attract small creditors. It is caused by the small value of the bond.
3. The possibility of assigning costs for servicing loans to the cost of production. This, in turn, allows you to reduce taxable profits.
4. Possibility to extend maturities.
5. Less costs than issuing shares.
6. Low risk. It ensures the attraction of certain groups of investors.

The positive side of such placement for enterprises is the ability to calculate the optimal yield of bonds during circulation. At the same time, the company can determine beneficial interest rates on payments, attract significantly more investors. As a negative point, it is worth noting the likelihood of an incomplete placement in primary trades. In case of low demand, the yield level of the bond will grow. Positive release conditions require certain actions to be taken. Negative, respectively, limit activities.

Negative sides

Above, many advantages of a bonded loan were described. However, with all favorable factors, this tool also has negative features. Among them is worth noting:

1. The complexity of the emission process. In order to obtain a loan, a subject simply needs to sign a contract with the organization that provides it. Issue of the bond involves the conclusion of agreements with the organizer of the issue, the depository, as well as the stock exchange. In addition, it is necessary to register and necessarily register a large enough documentation. For example, the prospectus consists of about 300 pages.
2. Impossibility to schedule time costs. The matter is that the legal support of the issuance process is carried out by the organizer. A person interested in obtaining funds can not influence this process, so he only has to accept that time costs can be significant.
3. Additional expenses. In case of receiving a bank loan, the debtor pays the amount of the principal obligation and interest. At the bonded loan additional charges will be added to these deductions, the value of which is 2-3% of the issue amount.

Nevertheless, the method of attracting investments considered today remains quite popular. With the help of this tool, many enterprises have the opportunity to implement their projects. Bond loan in some cases is beneficial for the government of the country. It allows to ensure the filling of the budget deficit with the least losses. Bonds can be purchased by both a citizen and a legal entity. Beginning investors before the conclusion of the transaction, experts recommend studying the scheme of the stock exchange.