Bond Program


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Bond Program

  1. 1. Lauton & Foxton Capital Partners Presents Bond Programs To Finance Your Project1370 Broadway, Suite 564New York, NY 10018Phone: 646 380 1989Email: info@lautonfoxtoncapital.comWeb: November 2011
  2. 2. What is a bond?All bonds are debt securities issued by organizations toraise capital for various purposes. When you buy a bond,you lend your money to the entity that issues it. In returnfor the loan of your funds, the issuer agrees to pay youinterest and ultimately to return the face value (principal)when the bond matures or is called, at a specified date inthe future known as the “maturity date” or “call date.” Contact us at or
  3. 3. Types of BondsAs it relates to project finance, there are various types ofbonds that can be used to procure capital for yourenergy, real estate, infrastructure or developmentproject: Corporate Bonds Industrial Bonds (Revenue and General) Municipal BondsThis presentation will focus on Corporate Bonds. Contact us at or www.lautonfoxtoncapital/submit_project
  4. 4. Corporate BondsCorporate bonds are debts issued by industrial, financial andservice companies to finance capital investment andoperating cash flow.The backing for the bond is usually the payment ability of thecompany, which is typically money to be earned from futureoperations. In some cases, the companys physical assets maybe used as collateral for bonds. Contact us at or www.lautonfoxtoncapital/submit_project
  5. 5. Using Corporate Bonds to Finance Your ProjectAdvantages Taking on debt by issuing bonds is usually cheaper than either a bank overdraft or the cost of raising equity through a share issue. A major advantage is that the return on debt (interest) is tax-deductible, whereas the return on equity (dividends) is paid out of a company’s profits, which are taxed before dividend payments can be made to stockholders. Bonds offer a more secure return for investors—dividends are paid out purely at the discretion of the company, whereas interest on debt must be paid according to the set terms of the bond. Financing through debt can be very useful for companies that do not want to relinquish control to others. Creditors have no influence on the board or company policy—unlike stockholders. Contact us at or www.lautonfoxtoncapital/submit_project
  6. 6. Using Corporate Bonds to Finance Your ProjectDisadvantages The risks for bondholders rise as more debt is issued. The debt covenants may prove too restrictive for the company. A company that is highly leveraged is more likely to face cash flow difficulties as it has to meet the coupon payments regardless of its income. If the company is publicly listed on a stock exchange, the risk to stockholders increases when debt is issued. This is due to the increased claims of the creditors, or bondholders, on the company’s capital and earnings, which must be used to service the debt before anything else. Bond holders are paid AFTER creditors. Contact us at or www.lautonfoxtoncapital/submit_project
  7. 7. Using Corporate Bonds to Finance Your ProjectWhat you need to know: An investment banker serves as an intermediary between the organization issuing the securities and the investors purchasing them. The underwriter, may or may not be the investment bank issuing the bonds. When an investment banks underwrites the bonds, they assume the risk of buying the bonds and reselling them to the public or other dealers. When an investment banks does not underwrite the bonds, they are working in a sales agent capacity to market the bonds on a best efforts basis. The investment house is also responsible for filing all of the necessary forms with the SEC, setting the price for the bonds and taking the leading in bringing the bonds to market. Contact us at or www.lautonfoxtoncapital/submit_project
  8. 8. Using Corporate Bonds to Finance Your ProjectWhat you need to know (con’t) Corporate bonds are usually sold in issuances of $1,000. The investment bank earns a profit on the difference between the purchase price of the bond and the selling price of the bond. This is called the yield spread or underwriting spread. The riskier a bond, the larger the spread. If bonds are purchased for investment and NOT resale, they do NOT have to be registered with the SEC. These types are bonds are commonly referred to as letter bonds, or a letter of security. A bonds risk level, or the risk that the bond issuer will default on payments to bondholders, is measured by bond rating agencies. Several companies rate credit, but Standard & Poors and Moodys are the two largest. Contact us at or www.lautonfoxtoncapital/submit_project
  9. 9. Timelines for Bond Procurement Analysis of financial alternatives Weeks 0-4 Preparation of legal documents Weeks 1-17 Preparation of disclosure documents Weeks 2-20 Forecasts of costs and revenues Weeks 4-20 Bond Ratings Weeks 20-23 Bond Marketing Weeks 21-24 Bond Closing and Receipt of Funds Weeks 23-26 Contact us at or
  10. 10. Submit your projectWe have several investment houses that will work withyou to utilize bonds to finance your project.Please contact us for a no obligation review of yourproject to determine if bond financing will work for you. Phone: 646 380 1989 Email: Web: Contact us at or www.lautonfoxtoncapital/submit_project